What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-07 compared with 2022-02-08 · 311 added, 282 removed, 931 unchanged (39% of the section changed)

30 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowances for rebates and discounts owed to governmental entities

Description of the Matter

As discussed in Note 1 to the consolidated financial statements, the Company recognizes revenues for product received by its customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and government rebates.

Allowances for rebates owed pursuant to the Medicaid Drug Rebate Program in the U.S.

Description of the Matter As discussed in Note 1 to the consolidated financial statements, the Company recognizes revenues for product received by its customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and government rebates.

Liabilities related to sales allowances are presented within accrued and other current liabilities on the consolidated balance sheet and totaled $192.1 million as of December 31, 2022.

Auditing the allowances for rebates and discounts owed to governmental entities, including the Medicaid Drug Rebate Program in the U.S.

and Medicare Part D Coverage Gap, was complex and highly judgmental due to the significant estimation uncertainty involved in management’s assumptions, including the levels of expected utilization of these rebates and discounts based on the amount of drugs sold to eligible patients, as well as the complexity of the government mandated calculations.

The allowances for rebates and discounts owed to governmental entities are sensitive to these significant assumptions and calculations.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s review of the allowances for rebates and discounts owed to governmental entities.

For example, we tested controls over management’s review of the significant assumptions, such as the utilization of these rebates and discounts as well as controls over management’s review of the application of the government mandated calculations.

To test the allowances for rebates and discounts owed to governmental entities, we performed audit procedures that included, among others, evaluating the methodologies used and testing the significant assumptions discussed above.

Auditing the allowances for rebates owed pursuant to the Medicaid Drug Rebate Program in the U.S.

was complex and highly judgmental due to the significant estimation uncertainty involved in management’s assumptions, including the levels of expected utilization of these rebates based on the amount of drugs sold to eligible patients, as well as the complexity of the government mandated calculations.

The allowances for rebates owed pursuant to the Medicaid Drug Rebate Program in the U.S.

are sensitive to these significant assumptions and calculations.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s review of the allowances for rebates owed pursuant to the Medicaid Drug Rebate Program in the U.S.

For example, we tested controls over management’s review of the significant assumptions, such as the utilization of these rebates as well as controls over management’s review of the application of the government mandated calculations.

To test the allowances for rebates owed pursuant to the Medicaid Drug Rebate Program in the U.S., we performed audit procedures that included, among others, evaluating the methodologies used and testing the significant assumptions discussed above.

We compared the significant assumptions used by management to historical trends, evaluated the change in the accruals from prior periods, and assessed the historical accuracy of management’s estimates against actual results.

We also tested the completeness and accuracy of the underlying data used in the Company’s calculations through reconciliation to third-party invoices, claims data and actual cash payments.

In addition, we involved our governmental pricing specialists to assist in evaluating management’s methodology and calculations used to measure certain estimated rebates and discounts.

In addition, we involved our governmental pricing specialists to assist in evaluating management’s methodology and calculations used to measure the estimated rebates.

Valuation of acquisition-related contingent consideration liability

Description of the Matter

As discussed in Note 3 to the consolidated financial statements, the Company’s acquisition-related contingent consideration liability, which consists of certain future royalty obligations on future net revenues of ICLUSIG, is remeasured to its estimated fair value each reporting period, with changes in fair value recorded in the consolidated statements of operations.

Description of the Matter As discussed in Note 3 to the consolidated financial statements, the Company’s acquisition-related contingent consideration liability, which consists of certain future royalty obligations on future net revenues of ICLUSIG, is remeasured to its estimated fair value each reporting period, with changes in fair value recorded in the consolidated statements of operations.

As of December 31, 2022, the acquisition-related contingent consideration liability was $221.0 million.

Auditing the valuation of the acquisition-related contingent consideration liability was complex and highly judgmental due to the significant estimation required in determining the fair value.

In particular, the fair value estimate was sensitive to significant assumptions such as the discount rate and projected future net revenues of ICLUSIG, which are affected by expectations about future industry, market or economic conditions, and are forward-looking and inherently uncertain.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of the acquisition-related contingent consideration liability.

In particular, the fair value estimate was sensitive to significant assumptions such as the discount rate and projected future net revenues of ICLUSIG, which are affected by expectations about future industry, market and economic conditions, and are forward-looking and inherently uncertain.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of the acquisition-related contingent consideration liability.

For example, we tested the Company's controls over management’s review of the valuation model, including controls over the significant assumptions utilized in the calculation, such as the discount rate and the projected future net revenues of ICLUSIG.

3 unchanged sentences

In addition, we assessed the historical accuracy of management’s estimates against actual performance.

Realizability of deferred tax assets

Description of the Matter

As discussed in Note 12 to the consolidated financial statements, at December 31, 2021, the Company had deferred tax assets related to deductible temporary differences and tax credit carryforwards of $507.9 million, net of a $408.2 million valuation allowance.

Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

During the fiscal year ended December 31, 2021, the Company concluded that certain of its deferred tax assets were more likely than not to be realized in the future and released the valuation allowance on a portion of its U.S.

deferred tax assets resulting in a tax benefit.

Auditing management’s assessment of the realizability of its deferred tax assets involved complex auditor judgment because management’s estimate of future taxable income is highly judgmental and based on significant assumptions that may be affected by future market or economic conditions and the Company’s performance.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s assessment of the realizability of deferred tax assets.

For example, we tested controls over management’s review of the significant assumptions used in estimating the projections of future taxable income, exclusive of reversing temporary differences, as well as controls over management’s review of the scheduling of the future reversals of existing temporary differences.

To test the realizability of deferred tax assets, we performed audit procedures that included, among others, evaluating the assumptions used by the Company to develop projections of future taxable income, exclusive of reversing temporary differences, and tested the completeness and accuracy of the underlying data used in its projections.

For example, we compared the projections with the actual results of prior periods, as well as management’s consideration of current industry and economic trends.

We also assessed the historical accuracy of management’s projections and compared the projections with other forecasted financial information prepared by the Company.

Additionally, we performed sensitivity analyses over the forecasted financial information.

We also tested the scheduling of the future reversals of existing temporary differences.

/s/ Ernst & Young LLP

9 unchanged sentences

allowance for credit losses $ 0 as of December 31, 2022 and 2021)

287,543 290,752

Accounts receivable 644,879 616,300

Inventory 41,995 27,904

Prepaid expenses and other current assets 167,011 126,278

Total current assets 4,092,850 3,118,674

Restricted cash and investments

Restricted cash 1,698 1,720

Long term investments 133,676 221,266

Inventory 78,964 29,034

Property and equipment, net 739,310 723,920

1 unchanged sentence

Other intangible assets, net 129,219 150,755

Goodwill 155,593 155,593

Deferred income tax asset 457,941 467,538

Other assets, net 25,435 37,304

Total assets $ 5,840,984 $ 4,933,352

LIABILITIES AND STOCKHOLDERS’ EQUITY

19 unchanged sentences

Additional paid-in capital 4,792,041 4,567,111

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss) 15,069 ( 19,454 )

Accumulated deficit ( 437,214 ) ( 777,874 )

( 1,726,455 )

Total stockholders’ equity 4,370,119 3,770,004

5 unchanged sentences

Year Ended December 31,

2022 2021 2020

Product revenues, net $ 2,746,897 $ 2,322,012 $ 2,068,736

6 unchanged sentences

Selling, general and administrative 1,002,140 739,560 516,922

Change in fair value of acquisition-related contingent consideration

Collaboration loss sharing

Loss on change in fair value of acquisition-related contingent consideration 12,149 14,741 23,385

(Profit) and loss sharing under collaboration agreements 7,973 37,019 42,801

Total costs and expenses 2,815,195 2,400,490 2,930,378

3 unchanged sentences

Unrealized (loss) gain on long term investments ( 87,590 ) ( 24,072 ) 10,426

Income (loss) before (benefit) provision for income taxes

(Benefit) provision for income taxes

Income (loss) before provision (benefit) for income taxes 529,116 570,444 ( 232,218 )

Provision (benefit) for income taxes 188,456 ( 378,137 ) 63,479

Net income (loss) $ 340,660 $ 948,581 $ ( 295,697 )

Net income (loss) per share:

Basic $ 1.53 $ 4.30 $ ( 1.36 )

Diluted $ 1.52 $ 4.27 $ ( 1.36 )

Shares used in computing net income (loss) per share:

Basic 222,004 220,428 218,073

Diluted 223,958 222,074 218,073

See accompanying notes.

3 unchanged sentences

Year Ended December 31,

2022 2021 2020

Net income (loss) $ 340,660 $ 948,581 $ ( 295,697 )

Other comprehensive income (loss):

Foreign currency translation (loss) gain

Foreign currency translation gain (loss) 13,065 ( 2,959 ) 8,450

Unrealized (loss) gain on marketable securities, net of tax ( 3,918 ) ( 1,289 ) 95

6 unchanged sentences

(in thousands, except number of shares)

Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Accumulated

Deficit Total

Stockholders’

2 unchanged sentences

Issuance of 2,677,810 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes, and 258,453 shares of Common Stock under the ESPP

3 110,302 — — 110,305

Issuance of 6,350 shares of Common Stock for services rendered

— 546 — — 546

Issuance of 368,886 shares of Common Stock upon conversion of Convertible Senior Notes due 2020

— 18,999 — — 18,999

Stock compensation — 178,527 — — 178,527

Other comprehensive loss

Adoption of ASU No.

Other comprehensive income — — 182 — 182

Net loss — — — ( 295,697 ) ( 295,697 )

Balances at December 31, 2020

1 unchanged sentence

Issuance of 1,324,926 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes, and 264,503 shares of Common Stock under the ESPP

2 28,684 — — 28,686

Issuance of 5,675 shares of Common Stock for services rendered

Issuance of 368,886 shares of Common Stock upon conversion of Convertible Senior Notes due 2020

— 434 — — 434

Stock compensation — 185,129 — — 185,129

Other comprehensive income

Other comprehensive loss — — ( 4,094 ) — ( 4,094 )

Net income — — — 948,581 948,581

Balances at December 31, 2021

1 unchanged sentence

Issuance of 1,348,122 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes, and 308,413 shares of Common Stock under the ESPP

2 34,812 — — 34,814

Issuance of 5,751 shares of Common Stock for services rendered

— 427 — — 427

Stock compensation — 189,691 — — 189,691

Other comprehensive loss

Other comprehensive income — — 34,523 — 34,523

Net income — — — 340,660 340,660

Balances at December 31, 2022

$ 223 $ 4,792,041 $ 15,069 $ ( 437,214 ) $ 4,370,119

See accompanying notes.

3 unchanged sentences

Year Ended December 31,

2022 2021 2020

Cash flows from operating activities:

Net income (loss) $ 340,660 $ 948,581 $ ( 295,697 )

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 67,855 57,844 51,807

1 unchanged sentence

Deferred income taxes (including benefit from valuation allowance release) 57,091 ( 465,604 ) ( 350 )

Unrealized foreign exchange losses (gains) and other, net 17,366 1,417 546

Unrealized loss (gain) on long term investments 87,590 24,072 ( 10,426 )

Change in fair value of acquisition-related contingent consideration

Loss on change in fair value of acquisition-related contingent consideration 12,149 14,741 23,385

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other assets ( 30,739 ) ( 64,080 ) ( 8,050 )

Inventory ( 67,504 ) ( 20,965 ) ( 19,468 )

Accounts payable 105,436 73,343 15,120

13 unchanged sentences

Payment of contingent consideration ( 32,746 ) ( 20,093 ) ( 37,760 )

Net cash provided by financing activities

Effect of exchange rates on cash, cash equivalents, restricted cash and investments

Net increase (decrease) in cash, cash equivalents, restricted cash and investments

Cash, cash equivalents, restricted cash and investments at beginning of period

Net cash (used in) provided by financing activities ( 794 ) 6,176 71,709

Effect of exchange rates on cash, cash equivalents, and restricted cash 3,355 ( 3,570 ) 2,949

Net increase (decrease) in cash, cash equivalents, and restricted cash 893,960 544,395 ( 318,942 )

Cash, cash equivalents, and restricted cash at beginning of period 2,059,160 1,514,765 1,833,707

Cash, cash equivalents, restricted cash and investments at end of period $ 2,953,120 $ 2,059,160 $ 1,514,765

Supplemental Schedule of Cash Flow Information

Interest paid

Income taxes paid $ 136,242 $ 67,731 $ 70,712

Reclassification to common stock and additional paid in capital in connection with conversions of 1.25 % convertible senior notes due 2020

$ — $ — $ 18,999

Unpaid purchases of property and equipment $ 3,493 $ 27,098 $ 22,807

55 unchanged sentences

Accounts Receivable.

As of December 31, 2021 and 2020, we had no allowance for doubtful accounts.

As of December 31, 2022, we had a de minimis amount of allowance for doubtful accounts, and as of December 31, 2021, we had no allowance for doubtful accounts.

We provide an allowance for doubtful accounts based on management’s assessment of the collectability of specific customer accounts, which includes consideration of the credit worthiness and financial condition of those customers, aging of such receivables, history of collectability with the customer and the general economic environment.

We record an allowance to reduce the receivables to the amount that is expected to be collected.

Inventories are determined at the lower of cost and net realizable value with cost determined under the specific identification method and may consist of raw materials, work in process and finished goods.

We capitalize inventory after FDA approval as the related costs are expected to be recoverable through the commercialization of the product.

Costs incurred prior to FDA approval are recorded as research and development expense in our statements of operations.

Raw materials and work-in-process inventory are not subject to expiration and the shelf life of finished goods inventory is approximately 36 months from the start of manufacturing of the finished goods.

Inventories may consist of raw materials, work in process and finished goods and are recorded at the lower of cost and net realizable value.

Inventory costs are primarily accounted for under the specific identification method.

We capitalize inventory after regulatory approval from U.S.

Food and Drug Administration (FDA), European Medicines Agency (EMA) or Japanese Ministry of Health, Labour and Welfare (MHLW) as the related costs are expected to be recoverable through the commercialization of the product.

Costs incurred prior to approval are recorded as research and development expense in our statements of operations.

Raw materials and work-in-process inventory are monitored for obsolescence, as applicable, and generally the shelf life of the finished goods inventory is approximately 36 months from the start of manufacturing of the finished goods, with the exception of OPZELURA, which currently has an approximate shelf life of 24 months.

We evaluate for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life.

48 unchanged sentences

Any interest and penalties on uncertain tax positions are included within the tax provision.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in March 2020 to provide an estimated $2.2 trillion designed to stimulate the U.S.

economy during the COVID-19 pandemic.

The Act includes tax relief, government loans, grants and investments for entities in affected industries, which has related accounting and financial reporting impacts.

Disclosure for certain income tax accounting measures are required in the period of enactment and disclosure for government loans, investments, grants, and revenue recognition are required in future periods as federal agencies establish rules and procedures to implement the CARES Act.

During 2020, we delayed the payment of certain employer payroll tax amounts to future periods as allowed under the Act.

We do not expect the CARES Act to have a material impact on our overall financial results, our income tax provision or our liquidity.

We have further described the impact and risks of the COVID-19 pandemic on our business in Item 1A.

Risk Factors.

Net Income (Loss) Per Share.

2 unchanged sentences

Accumulated Other Comprehensive Income (Loss).

Accumulated other comprehensive income (loss) consists of unrealized gains or losses on our marketable debt securities that are classified as available-for-sale, foreign currency translation gains or losses and defined benefit pension obligations.

Revenue Recognition.

11 unchanged sentences

Our product revenues consist of sales of JAKAFI, OPZELURA and PEMAZYRE in the U.S., sales of MINJUVI, PEMAZYRE and ICLUSIG in Europe, and sales of PEMAZYRE in Japan.

Product revenues are recognized once we satisfy the performance obligation at a point in time under the revenue recognition criteria as described above.

We sell JAKAFI, OPZELURA and PEMAZYRE to our customers in the U.S., which include specialty pharmacies, specialty distributors and wholesalers.

Product revenues are recognized at a point in time once we satisfy the performance obligation and control is transferred under the revenue recognition criteria as described above.

We sell JAKAFI, OPZELURA and PEMAZYRE to our customers in the U.S., which include specialty and retail pharmacies, specialty distributors and wholesalers.

We sell MINJUVI, PEMAZYRE and ICLUSIG to our customers in the European Union and certain other jurisdictions, which include retail pharmacies, hospital pharmacies and distributors.

8 unchanged sentences

Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program in the U.S.

and mandated discounts in Europe in markets where government-sponsored healthcare systems are

the primary payers for healthcare.

and mandated discounts in Europe in markets where government-sponsored healthcare systems are the primary payers for healthcare.

Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers.

The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launches.

Our estimates for expected utilization of rebates are based on data received from our customers.

In the fourth quarter of 2021 and fiscal year 2022 for non-covered patients of OPZELURA, we offered a full buy-down program as we were in the process of obtaining commercial insurance coverage for OPZELURA.

During 2022, we contracted with the three largest group purchasing organizations to obtain coverage for OPZELURA.

All full buy-down programs for OPZELURA ended effective January 31, 2023.

Our estimates for expected utilization of commercial insurance rebates are based on data received from our customers.

Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates.

If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

Chargebacks are discounts that occur when certain contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, purchase directly from our wholesalers.

Chargebacks are discounts that occur when certain indirect contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, purchase directly from our wholesalers.

Contracted customers generally purchase the product at a discounted price.

12 unchanged sentences

We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators.

During the fourth quarter of 2021 and fiscal year 2022, we also offered a full buy-down program to non-covered patients of OPZELURA as we were obtaining commercial insurance coverage for OPZELURA.

All full buy-down programs for OPZELURA ended effective January 31, 2023.

Product Royalty Revenues

3 unchanged sentences

Royalty revenues on commercial sales for capmatinib (marketed as TABRECTA®) by Novartis are based on net sales of licensed products in the licensed territories as provided by Novartis.

Royalty revenues on commercial sales for pemigatinib (marketed as PEMAZYRE®) by Innovent Biologics, Inc.

(“Innovent”) are based on net sales of licensed products in licensed territories as provided by Innovent.

We recognize royalty revenues in the period the sales occur.

5 unchanged sentences

When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue.

In making these assessments,

management considers the likelihood and magnitude of a potential reversal of revenue.

In making these assessments, management considers the likelihood and magnitude of a potential reversal of revenue.

These estimates are re-assessed each reporting period as required.

23 unchanged sentences

Cost of product revenues includes all product related costs.

In addition, cost of product revenues include low single-digit royalties under our collaboration and license agreement to Novartis on all future sales of JAKAFI in the United States and the amortization of our licensed intellectual property for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years from the date of acquisition on June 1, 2016 of all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l.

In addition, cost of product revenues include royalties owed under our collaboration and license agreements, contingent on certain conditions, and the amortization of our licensed intellectual property for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years from the date of acquisition on June 1, 2016 of all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l.

(since renamed Incyte Biosciences Luxembourg S.à.r.l.) from ARIAD Pharmaceuticals, Inc.

9 unchanged sentences

If a collaboration is a cost-sharing arrangement in which both we and our collaborator perform development work and share costs, we also recognize, as research and development expense in the period when our collaborator incurs development expenses, our portion of the co-development expenses that we are obligated to reimburse.

Costs incurred under the collaboration arrangement that are reimbursable to us are recorded net against the related research and development expenses.

Costs incurred under the collaboration arrangement that are reimbursable to us are recorded net against the related research and development expenses in the period in which the related expense is incurred.

We often contract with contract research organizations (“CROs”) to facilitate, coordinate and perform agreed upon research and development of a new drug.

10 unchanged sentences

CRO fees incurred to set up the clinical trial are expensed during the setup period.

Under our clinical trial collaboration agreements we may be reimbursed for certain development costs incurred.

Such costs are recorded as a reduction of research and development expense in the period in which the related expense is incurred.

Stock Compensation.

4 unchanged sentences

The fair value of PSUs are recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, which we assess as of the end of each reporting period.

the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting.

Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting.

Compensation expense for PSUs with market performance conditions is calculated using a Monte Carlo simulation model as of the date of grant and recorded over the requisite service period.

10 unchanged sentences

The fair value of the acquisition-related contingent consideration is remeasured each reporting period, with changes in fair value recorded in the consolidated statements of operations.

Collaboration loss sharing.

For the year ended December 31, 2021 and 2020, collaboration loss sharing represents our 50 % share of the United States loss for commercialization of MONJUVI (tafasitamab-cxix) under our agreement with MorphoSys, which is described in Note 6 below.

Acquisitions .

To determine whether acquisitions should be accounted for as a business combination or as an asset acquisition, we make certain judgments, which include assessing whether the acquired set of activities and assets would meet the definition of a business under the relevant accounting rules.

If the acquired set of activities and assets meets the definition of a business, assets acquired and liabilities assumed are required to be recorded at their respective fair values as of the acquisition date.

The excess of the purchase price over the fair value of the acquired net assets, where applicable, is recorded as goodwill.

If the acquired set of activities and assets does not meet the definition of a business, the transaction is recorded as an asset acquisition, with the purchase price being allocated to the acquired asset, with no goodwill recorded.

For a transaction recorded as an asset acquisition, any acquired in-process research and development that does not have an alternative future use is charged to expense at the acquisition date.

See Note 5 for additional information.

(Profit) and loss sharing under collaboration agreements.

For the year ended December 31, 2022 and 2021, (profit) and loss sharing under collaboration agreements represents our 50 % share of the United States loss for commercialization of MONJUVI (tafasitamab-cxix) under our agreement with MorphoSys, which is described in Note 7 below.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” This guidance applies to all entities and aims to reduce the complexity of tax accounting standards while enhancing reporting disclosures.

This guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein.

We adopted this guidance for the period beginning January 1, 2021.

Upon adoption, ASU No.

2019-12 had an immaterial impact on the consolidated financial statements.

As of December 31, 2021, there were no other recently issued accounting standards that may have a material impact on the Company's financial position, results of operations, or cash flows upon their adoption.

As of December 31, 2022, there were no new accounting pronouncements issued or adopted that may have a material impact on the Company's financial position, results of operations, or cash flows upon their adoption.

As discussed in Note 1, revenues are recognized under guidance within ASC 606.

1 unchanged sentence

For the Years Ended,

2022 2021 2020

JAKAFI revenues, net $ 2,409,225 $ 2,134,508 $ 1,937,850

7 unchanged sentences

TABRECTA product royalty revenues 15,411 10,389 4,144

PEMAZYRE product royalty revenues 1,205 — —

Total product royalty revenues 482,738 569,255 392,966

4 unchanged sentences

The following is a summary of our marketable security portfolio for the periods presented (in thousands):

Losses Estimated

December 31, 2022

24 unchanged sentences

Quoted Prices in

Significant Other

Active Markets for

Identical Assets

Balance as of

(Level 1) Significant Other

(Level 2) Significant

(Level 3) Balance as of

December 31, 2022

2 unchanged sentences

Long term investments (Note 7)

133,676 — — 133,676

Total assets $ 3,085,098 $ 287,543 $ — $ 3,372,641

Fair Value Measurement at Reporting Date Using:

Quoted Prices in

Significant Other

Active Markets for

Identical Assets

Balance as of

(Level 1) Significant Other

(Level 2) Significant

(Level 3) Balance as of

December 31, 2021

2 unchanged sentences

Long term investments (Note 7)

221,266 — — 221,266

Total assets $ 2,278,706 $ 290,752 $ — $ 2,569,458

The following fair value hierarchy table presents information about each major category of our financial liabilities measured at fair value on a recurring basis (in thousands):

1 unchanged sentence

Quoted Prices in

Significant Other

Active Markets for

Identical Liabilities

Balance as of

(Level 1) Significant Other

(Level 2) Significant

(Level 3) Balance as of

December 31, 2022

3 unchanged sentences

Quoted Prices in

Significant Other

Active Markets for

Identical Liabilities

Balance as of

(Level 1) Significant Other

(Level 2) Significant

(Level 3) Balance as of

December 31, 2021

7 unchanged sentences

Balance at December 31,

The fair value of the contingent consideration was determined on the date of acquisition, June 1, 2016, using an income approach based on projected future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment over 18 years , and discounted to present value at a rate of 10 %.

$ 221,000 $ 244,000

The initial fair value of the contingent consideration was determined on the date of acquisition, June 1, 2016, using an income approach based on projected future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment over 18 years, and discounted to present value at a rate of 10 %.

The fair value of the contingent consideration is remeasured each reporting period, with changes in fair value recorded in the consolidated statements of operations.

The valuation inputs utilized to estimate the fair value of the contingent consideration as of December 31, 2022 and 2021 included a discount rate of 10 % and updated projections of future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment.

The change in fair value of the contingent consideration during the year ended December 31, 2021 was due primarily to the impact of updated projections of future net revenues of ICLUSIG in the European Union and the passage of time.

The change in fair value of the contingent consideration during the year ended December 31, 2020 was due primarily to the passage of time as there were no other significant changes in the key assumptions.

We make payments to Takeda quarterly based on the royalties or any additional milestone payments earned in the previous quarter.

The losses on change in fair value of the contingent consideration during the years ended December 31, 2022 and 2021, were due primarily to the impact of updated projections of future net revenues of ICLUSIG in the European Union and the passage of time.

We generally make payments to Takeda quarterly based on the royalties earned in the previous quarter.

As of December 31, 2022 and 2021, contingent consideration earned but not yet paid was $ 9.3 million and $ 19.6 million, respectively, and was included in accrued and other current liabilities.

1 unchanged sentence

During the years ended December 31, 2022 and 2021, there were no measurements required for any assets or liabilities at fair value on a non-recurring basis.

Concentrations of Credit Risk and Current Expected Credit Losses

Concentration of Credit Risk and Current Expected Credit Losses

In November 2009, we entered into a collaboration and license agreement with Novartis.

In December 2009, we entered into a license, development and commercialization agreement with Lilly.

In December 2018, we entered into a research collaboration and licensing agreement with Innovent Biologics, Inc.

(“Innovent”).

In July 2019, we entered into a collaboration and license agreement with Zai Lab (Shanghai) Co., Ltd., a subsidiary of Zai Lab Limited (collectively, “Zai Lab”).

The above collaboration partners comprised, in aggregate, 20 % and 36 % of the accounts receivable balance as of December 31, 2022 and 2021, respectively.

5 unchanged sentences

Product Revenues for the

2022 2021 2020

Customer A 19 % 18 % 20 %

Customer B 11 % 12 % 13 %

Customer C 18 % 18 % 17 %

Customer D 5 % 9 % 11 %

Customer E 10 % 11 % 10 %

Customer F 14 % 8 % 5 %

We are exposed to risks associated with extending credit to customers related to the sale of products.

Customers A, B, C, D and E comprised, in the aggregate, 31 % and 33 % of the accounts receivable balance as of December 31, 2021 and 2020, respectively.

Customers A, B, C, D, E, and F comprised, in the aggregate, 43 % and 38 % of the accounts receivable balance as of December 31, 2022 and 2021, respectively.

The concentration of credit risk relating to our other product revenues or accounts receivable is not significant.

We assessed our collaborative and customer receivable assets as of December 31, 2022 according to our accounting policy for applying reserves for expected credit losses, noting minimal history of uncollectible receivables and the continued perceived creditworthiness of our third party sales relationships, upon which the expected credit losses were considered de minimis.

On November 17, 2022, we completed our acquisition of 100 % of the outstanding shares of Villaris Therapeutics, Inc.

("Villaris").

Villaris is an early-stage biopharma company focused on the development of novel antibody therapeutics for vitiligo.

We evaluated the acquired set of activities and assets, and concluded that the acquisition of Villaris did not meet the definition of a business, as substantially all of the purchase price was concentrated in a single identifiable preclinical asset.

Therefore, the transaction was accounted for as an asset acquisition.

Under the terms of the acquisition agreement, we made an upfront payment of $ 70.3 million, which was attributed to the fair value of the preclinical asset acquired.

As the preclinical asset had no alternative future use at the date of acquisition, the entire upfront payment amount was expensed to research and development expense on the consolidated statement of operations for the year ended December 31, 2022.

There were no material assets or liabilities recorded on the consolidated balance sheet as part of this acquisition.

Former Villaris stockholders are eligible to receive up to $ 310.0 million upon achievement of certain development and regulatory milestones, as well as up to an additional $ 1.05 billion in commercial milestones on net sales of commercialized products.

We will accrue for these milestone payments in the future when it becomes probable they will be achieved.

Our inventory balance consists of the following (in thousands):

8 unchanged sentences

The loss of a supplier, the deterioration of our relationship with a supplier, or any unilateral violation of the contractual terms under which we are supplied components by a supplier could adversely affect our total revenues and gross margins.

We capitalize inventory after FDA approval as the related costs are expected to be recoverable through the commercialization of the product.

Costs incurred prior to FDA approval are recorded as research and development expense in our statements of operations.

At December 31, 2021, inventory with approximately $ 71.9 million of product costs incurred prior to FDA approval had not yet been sold.

We capitalize inventory after regulatory approval as the related costs are expected to be recoverable through the commercialization of the product.

Costs incurred prior to regulatory approval are recorded as research and development expense in our statements of operations.

At December 31, 2022, inventory with approximately $ 47.5 million of product costs incurred prior to regulatory approval had not yet been sold.

We expect to sell the pre-commercialization inventory over the next 25 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

2 unchanged sentences

Under the terms of the agreement, Novartis received exclusive development and commercialization rights outside of the United States to our JAK inhibitor ruxolitinib and certain back-up compounds for hematologic and oncology indications, including all hematological malignancies, solid tumors and myeloproliferative diseases.

We retained exclusive development and

commercialization rights to JAKAFI (ruxolitinib) in the United States and in certain other indications.

We retained exclusive development and commercialization rights to JAKAFI (ruxolitinib) in the United States and in certain other indications.

Novartis also received worldwide exclusive development and commercialization rights to our MET inhibitor compound capmatinib and certain back-up compounds in all indications.

Under this agreement, we were initially eligible to receive up to $ 174.0 million for the achievement of development milestones, up to $ 495.0 million for the achievement of regulatory milestones and up to $ 500.0 million for the achievement of sales milestones.

In addition, we are eligible to receive up to $ 75.0 million of additional potential development and regulatory milestones relating to GVHD.

In addition, we are eligible to receive up to $ 75.0 million of additional potential development and regulatory milestones relating to graft-versus-host-disease (“GVHD”).

We have recognized and received, in the aggregate, $ 157.0 million for the achievement of development milestones, $ 340.0 million for the achievement of regulatory milestones and $ 200.0 million for the achievement of sales milestones through December 31, 2022.

1 unchanged sentence

We recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Novartis.

In 2020, we recognized a $ 25.0 million development milestone and a $ 45.0 million regulatory milestone for the FDA approval of capmatinib as TABRECTA for the treatment of adult patients with metastatic non-small cell lung cancer (NSCLC) whose tumors have a mutation that leads to MET exon 14 skipping (METex14) as detected by an FDA-approved test, a $ 20.0 million regulatory milestone for the Japanese Ministry of Health, Labour and Welfare approval of TABRECTA for METex14 mutation-positive advanced and/or recurrent unresectable non-small cell lung cancer and a $ 80.0 million sales milestone for Novartis achieving annual net sales of a JAK licensed product of $ 1.2 billion.

In April 2022, we recognized a $ 15.0 million regulatory milestone for the positive opinion issued by the Committee for Medicinal Products for Human Use (CHMP) of the EMA that recommends granting marketing authorization for capmatinib (TABRECTA) as a monotherapy for the treatment of adults with advanced non-small cell lung cancer.

Additionally, in May 2022, we recognized a $ 45.0 million regulatory milestone as a result of the European Commission’s approval of JAKAVI (ruxolitinib) as the first post-steroid treatment for acute and chronic GVHD.

We also are eligible to receive tiered, double-digit royalties ranging from the upper-teens to the mid-twenties on future JAKAVI net sales outside of the United States, and tiered, worldwide royalties on TABRECTA net sales that range from 12 % to 14 %.

We are obligated to pay to Novartis tiered royalties in the low single-digits on future JAKAFI net sales within the United States.

During the years ended December 31, 2021, 2020 and 2019, such royalties payable to Novartis on net sales within the United States totaled $ 99.6 million, $ 89.9 million and $ 77.6 million, respectively, and were reflected in cost of product revenues on the consolidated statements of operations.

At December 31, 2021 and 2020, $ 148.1 million and $ 96.4 million, respectively, of accrued royalties payable to Novartis were included in accrued and other current liabilities on the consolidated balance sheets.

We are obligated to pay to Novartis tiered royalties in the low single-digits on future JAKAFI net sales within the United States contingent on certain conditions.

During the years ended December 31, 2022, 2021 and 2020, such royalties on net sales within the United States totaled $ 113.1 million, $ 99.6 million and $ 89.9 million, respectively, and were reflected in cost of product revenues on the consolidated statements of operations.

At December 31, 2022 and 2021, $ 253.5 million and $ 148.1 million, respectively, of accrued royalties were included in accrued and other current liabilities on the consolidated balance sheets, payment of which is dependent on the outcome of a contract dispute with Novartis.

Each company is responsible for costs relating to the development and commercialization of ruxolitinib in its respective territories, with costs of collaborative studies shared equally.

6 unchanged sentences

In addition, for the years ended December 31, 2022, 2021 and 2020, we recorded $ 331.6 million, $ 338.0 million and $ 277.9 million, respectively, of product royalty revenues related to Novartis net sales of JAKAVI outside the United States.

For the years ended December 31, 2021 and 2020 we recorded $ 10.4 million and $ 4.1 million, respectively, of product royalty revenues related to Novartis net sales of TABRECTA worldwide.

For the years ended December 31, 2022, 2021 and 2020 we recorded $ 15.4 million, $ 10.4 million and $ 4.1 million, respectively, of product royalty revenues related to Novartis net sales of TABRECTA worldwide.

Lilly - Baricitinib

3 unchanged sentences

We have recognized and received, in aggregate, $ 149.0 million for the achievement of development milestones, $ 335.0 million for the achievement of regulatory milestones and $ 50.0 million for the achievement of sales milestones through December 31, 2022.

We are also eligible to receive tiered, double-digit royalties on future global sales with rates ranging up to the mid-twenties if a product is successfully commercialized.

We recognize development and regulatory milestones upon confirmation of achievement of the event, as development and regulatory approvals are events not controllable by us but rather development activities of Lilly and decisions made by regulatory agencies.

We recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Lilly.

In 2021, we recognized a $ 50.0 million sales milestone for Lilly achieving annual net sales of a licensed product of $ 1.0 billion.

In 2020, we recognized a $ 20.0 million regulatory milestone for the European Commission approval of OLUMIANT and a $ 10.0 million regulatory milestone for the MHLW approval of OLUMIANT for the treatment of moderate-to-severe atopic dermatitis in adult patients who are candidates for systemic therapy.

In May 2020, we amended our agreement with Lilly to enable Lilly to develop and commercialize baricitinib for the treatment of COVID-19.

As part of the amended agreement, in addition to the royalties described above, we will be entitled to receive additional royalty payments with rates in the low teens on global net sales of baricitinib for the treatment of COVID-19 that exceed a specified aggregate global net sales threshold.

In June 2022, we recognized a $ 40.0 million regulatory milestone for the FDA approval of OLUMIANT as a first-in-disease systemic treatment for adults with severe alopecia areata.

Additionally, in June 2022, we recognized a $ 20.0 million regulatory milestone for the European Commission’s approval for OLUMIANT for the treatment of adults with severe alopecia areata, and a $ 10.0 million regulatory milestone for the Ministry of Health, Labour and Welfare of Japan’s approval for OLUMIANT for the treatment of adults with severe alopecia areata in Japan.

The Lilly agreement will continue until Lilly no longer has any royalty payment obligations or, if earlier, the termination of the agreement in accordance with its terms.

7 unchanged sentences

In May 2019, the approval of JAKAFI in steroid-refractory acute GVHD triggered a $ 20.0 million milestone payment to Lilly.

In March 2022, the positive recommendation from the European Medicines Agency for regulatory approval of ruxolitinib in the GVHD field triggered an additional $ 20.0 million milestone payment to Lilly, which was recorded as research and development expense in our consolidated statements of operations.

In January 2015, we entered into a License, Development and Commercialization Agreement with Agenus Inc.

1 unchanged sentence

Under this agreement, which was amended in February 2017, the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using Agenus’ antibody discovery platforms.

Under the terms of the amended

agreement, we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against GITR, OX40, LAG-3 and TIM-3 as well as two undisclosed targets.

Under the terms of the amended agreement, we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against GITR, OX40, LAG-3 and TIM-3 as well as two undisclosed targets.

Targets may be designated profit-share programs, where all costs and profits are shared equally by us and Agenus, or royalty-bearing programs, where we are responsible for all costs associated with discovery, preclinical, clinical development and commercialization activities.

There are currently no profit-share programs.

For each royalty-bearing product other than GITR, OX40 and one undisclosed target, Agenus will be eligible to receive tiered royalties on global net sales ranging from 6 % to 12 %.

For GITR, OX40 and one undisclosed target, Agenus will be eligible to receive 15 % royalties on global net sales.

For each royalty-bearing product other than GITR and one undisclosed target, Agenus will be eligible to receive tiered royalties on global net sales ranging from 6 % to 12 %.

For GITR and one undisclosed target, Agenus will be eligible to receive 15 % royalties on global net sales.

The agreement may be terminated by us for convenience upon 12 months’ notice and may also be terminated under certain other circumstances, including material breach.

On October 19, 2022 we notified Agenus that we were terminating the OX40 project.

As of December 31, 2022, we have paid Agenus milestones totaling $ 30.0 million and 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.

In addition, in 2017 we also agreed to purchase 10.0 million shares of Agenus common stock for an aggregate purchase price of $ 60.0 million in cash, or $ 6.00 per share.

The fair market value of our long term investment in Agenus as of December 31, 2021 and 2020 was $ 38.9 million and $ 44.7 million, respectively.

In 2020, we sold an aggregate of approximately 3.7 million shares of Agenus common stock resulting in gross proceeds of approximately $ 17.2 million.

In 2021, we sold an aggregate of approximately 2.0 million shares of Agenus common stock resulting in gross proceeds of approximately $ 10.5 million.

As of December 31, 2021, we owned less than 5 % of the outstanding shares of Agenus common stock.

We intend to hold the investment in Agenus for the foreseeable future and therefore, are accounting for our shares held in Agenus at fair value whereby the investment is marked to market through earnings in each reporting period.

The fair market value of our long term investment in Agenus as of December 31, 2022 and 2021 was $ 29.0 million and $ 38.9 million, respectively.

We are accounting for our shares held in Agenus at fair value whereby the investment is marked to market through earnings in each reporting period.

Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying consolidated balance sheets.

For the years ended December 31, 2021, 2020 and 2019, we recorded an unrealized gain of $ 4.6 million, an unrealized loss of $ 10.3 million and an unrealized gain of $ 30.0 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

For the years ended December 31, 2022, 2021 and 2020, we recorded an unrealized loss of $ 9.9 million, an unrealized gain of $ 4.6 million and an unrealized loss of $ 10.3 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

In December 2016, we entered into a Collaboration and License Agreement with Merus N.V.

10 unchanged sentences

For each program as to which Merus exercises its option to co-fund development, Merus is eligible to receive a 50 % share of profits (or sustain 50 % of any losses) in the United States and be eligible to receive tiered royalties ranging from 6 % to 10 % of net sales of products outside of the United States.

If Merus opts to cease co-funding a program as to which it exercised its co-development option, then Merus will no longer receive a share of profits in the United States but will be eligible to

receive the same milestones from the co-funding termination date and the same tiered royalties described above with respect to programs where Merus does not have a right to co-fund development and, depending on the stage at which Merus chose to cease co-funding development costs, Merus will be eligible to receive additional royalties ranging up to 4 % of net sales in the United States.

As of December 31, 2021, we have paid Merus milestones totaling $ 2.0 million.

If Merus opts to cease co-funding a program as to which it exercised its co-development option, then Merus will no longer receive a share of profits in the United States but will be eligible to receive the same milestones from the co-funding termination date and the same tiered royalties described above with respect to programs where Merus does not have a right to co-fund development and, depending on the stage at which Merus chose to cease co-funding development costs, Merus will be eligible to receive additional royalties ranging up to 4 % of net sales in the United States.

As of December 31, 2022, we have paid Merus milestones totaling $ 3.0 million, which was recorded as research and development expense in our consolidated statements of operations.

The Merus agreement will continue on a program-by-program basis until we have no royalty payment obligations with respect to such program or, if earlier, the termination of the agreement or any program in accordance with the terms of the agreement.

2 unchanged sentences

If the agreement is terminated with respect to one or more programs, all rights in the terminated programs revert to Merus, subject to payment to us of a reverse royalty of up to 4 % on sales of future products, if Merus elects to pursue development and commercialization of products arising from the terminated programs.

In addition, in 2016 we entered into a Share Subscription Agreement with Merus, pursuant to which we agreed to purchase 3.2 million common shares of Merus for an aggregate purchase price of $ 80.0 million in cash, or $ 25.00 per share.

The fair market value of our total long term investment in Merus as of December 31, 2021 and 2020 was $ 112.9 million and $ 56.1 million, respectively.

In addition, in 2016 we entered into a Share Subscription Agreement with Merus, pursuant to which we purchased 3.2 million common shares of Merus for an aggregate purchase price of $ 80.0 million in cash, or $ 25.00 per share.

In January 2021, we purchased 350,000 common shares in Merus’ underwritten public offering of 4,848,485 common shares at the public offering price of $ 24.75 per share, or an aggregate purchase price of $ 8.7 million.

The fair market value of our total long term investment in Merus as of December 31, 2022 and 2021 was $ 54.9 million and $ 112.9 million, respectively.

As of December 31, 2022, we owned approximately 8 % of the outstanding common shares of Merus.

2 unchanged sentences

We believe the fair value option to be the most appropriate accounting method to account for securities in publicly held collaborators for which we have significant influence.

For the years ended December 31, 2021, 2020 and 2019, we recorded an unrealized gain of $ 48.1 million, $ 11.0 million, and $ 0.3 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

For the years ended December 31, 2022, 2021 and 2020, we recorded an unrealized loss of $ 58.0 million, an unrealized gain of $ 48.1 million, and an unrealized gain of $ 11.0 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

In January 2017, we entered into a Collaboration and License Agreement with Calithera Biosciences, Inc.

1 unchanged sentence

Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase inhibitors, including INCB01158.

We have agreed to co-fund 70 % of the global development costs for the development of the licensed products for hematology and oncology indications.

Calithera will have the right to conduct certain clinical development under the collaboration, including combination studies of a licensed product with a proprietary compound of Calithera.

We will be entitled to 60 % of the profits and losses from net sales of licensed product in the United States, and Calithera will have the right to co-detail licensed products in the United States, and we have agreed to pay Calithera tiered royalties ranging from the low to mid-double digits on net sales of licensed products outside the United States.

As of December 31, 2021, we have paid Calithera milestones totaling $ 12.0 million.

Calithera delivered notice of its decision to opt out of its co-funding obligation, effective on September 30, 2020.

As a result, the U.S.

profit sharing will no longer be in effect, we will be responsible for funding all of the development costs of INCB01158 and any other licensed products, and the agreement provides that we will pay Calithera tiered royalties ranging from the low to mid-double digits on net sales of licensed products both in the United States and outside the United States and additional royalties to reimburse Calithera for previously incurred development costs.

Calithera is eligible to receive $ 720.0 million in potential future development, regulatory and sales milestone payments and will have no further rights to research, develop or co-detail INCB001158.

We will have the right to take over the conduct of all activities related to the research, development and commercialization of INCB001158 for all indications in the hematology/oncology field.

The Calithera agreement will continue on a product-by-product and country-by-country basis for so long as we are developing or commercializing products in the United States (if the parties are sharing profits in the United States) and until we have no further royalty payment obligations, unless earlier terminated according to the terms of the agreement.

The agreement may be terminated in its entirety or on a product-by-product and/or a country-by-country basis by us for convenience.

The agreement may also be terminated by us for Calithera’s uncured material breach, by Calithera for our uncured material breach and by either party for bankruptcy or patent challenge.

If the agreement is terminated early with respect to one or more products or countries, all rights in the terminated products and countries revert to Calithera.

In addition, in 2017, we entered into a Stock Purchase Agreement with Calithera for the purchase of 1.7 million common shares of Calithera for an aggregate purchase price of $ 8.0 million in cash, or $ 4.65 per share.

We had initially agreed to co-fund 70 % of the global development costs for the development of the licensed products for hematology and oncology indications, but effective September 30, 2020 Calithera opted out of its co-funding obligation, and we became responsible for funding all of the development costs of INCB01158 and any other licensed products.

In December 2022, the Collaboration and License Agreement was terminated.

As a result of the termination, rights to INCB01158 and the other licensed products reverted to Calithera.

In addition, in 2017, we entered into a Stock Purchase Agreement with Calithera, pursuant to which we purchased 1.7 million shares of Calithera common stock for an aggregate purchase price of $ 8.0 million in cash, or $ 4.65 per share.

In June 2022, Calithera effected a one-for-twenty reverse stock split of its outstanding common stock, adjusting our ownership to 86,021 shares of Calithera’s common stock.

The fair market value of our long term investment in Calithera as of December 31, 2022 and 2021 was $ 0.3 million and $ 1.1 million, respectively.

As of December 31, 2021, we owned approximately 2 % of the outstanding shares of Calithera common stock.

We intend to hold the investment in Calithera for the foreseeable future and therefore, are accounting for our shares held in Calithera at fair value whereby the investment is marked to market through earnings in each reporting period.

Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying consolidated balance sheets.

For the years ended December 31, 2021, 2020 and 2019, we recorded an unrealized loss of $ 7.3 million, an unrealized loss of $ 1.4 million, and an unrealized gain of $ 2.9 million, respectively, based on the change in fair value of Calithera’s common stock during the respective periods.

Through December 31, 2022, we accounted for our shares held in Calithera at fair value whereby the investment was marked to market through earnings in each reporting period, and we classified the investment within long term investments on the accompanying consolidated balance sheets.

For the years ended December 31, 2022, 2021 and 2020, we recorded an unrealized loss of $ 0.9 million, $ 7.3 million, and $ 1.4 million, respectively, based on the change in fair value of Calithera’s common stock during the respective periods.

During January 2023, Calithera announced that its Board of Directors approved the dissolution of Calithera and the complete liquidation of its assets.

Subsequent to this announcement, in January 2023, we sold all of our remaining shares of Calithera common stock.

In October 2017, we entered into a Global Collaboration and License Agreement with MacroGenics, Inc.

4 unchanged sentences

In addition, MacroGenics has the right to manufacture a portion of both companies’ global clinical and commercial supply needs of INCMGA0012.

In July 2022, we amended our agreement with MacroGenics to reflect changes related to the payment of certain milestones and paid MacroGenics $ 30.0 million.

As of December 31, 2022, we have paid MacroGenics developmental milestones totaling $ 100.0 million.

MacroGenics is eligible to receive up to an additional $ 350.0 million in future contingent development and regulatory milestones, and up to $ 330.0 million in sales milestones as well as tiered royalties ranging from 15 % to 24 % of global net sales.

After the amendment, MacroGenics will be 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 as well as tiered royalties ranging from 15 % to 24 % of global net sales.

The MacroGenics agreement will continue until we are no longer commercializing, developing or manufacturing INCMGA0012 or, if earlier, the termination of the agreement in accordance with its terms.

1 unchanged sentence

The agreement may also be terminated by either party under certain other circumstances, including material breach, as set forth in the agreement.

Research and development expenses for the years ended December 31, 2021, 2020 and 2019, also included $ 72.3 million, $ 59.0 million and $ 51.1 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement.

Research and development expenses for the years ended December 31, 2022, 2021 and 2020, also included $ 89.2 million, $ 72.3 million and $ 59.0 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

At December 31, 2022 and 2021, a total of $ 2.9 million and $ 0.7 million, respectively, of such costs were included in accrued and other liabilities on the consolidated balance sheets.

3 unchanged sentences

We have agreed to pay Syros up to $ 54.0 million in target selection and option exercise fees should we decide to exercise all of our options under the agreement.

For products resulting from the collaboration against each of the

seven selected and validated targets, we have agreed to pay up to $ 50.0 million in potential development and regulatory milestones and up to $ 65.0 million in potential sales milestones.

For products resulting from the collaboration against each of the seven selected and validated targets, we have agreed to pay up to $ 50.0 million in potential development and regulatory milestones and up to $ 65.0 million in potential sales milestones.

Syros is also eligible to receive low single-digit royalties on net sales of products resulting from the collaboration.

In addition, in 2018, we entered into a Stock Purchase Agreement with Syros for the purchase of 0.8 million shares of common stock of Syros for an aggregate purchase price of $ 10.0 million in cash, or $ 12.61 per share.

Subsequently in 2018, we entered into an Amended Stock Purchase Agreement with Syros for the purchase of an additional 0.1 million common shares of Syros for an aggregate purchase price of $ 1.4 million in cash, or $ 9.55 per share.

In addition, in 2018, we entered into a Stock Purchase Agreement with Syros, pursuant to which we purchased 0.8 million shares of Syros common stock for an aggregate purchase price of $ 10.0 million in cash, or $ 12.61 per share.

Subsequently in 2018, we entered into an Amended Stock Purchase Agreement with Syros, pursuant to which we purchased an additional 0.1 million shares of Syros common stock for an aggregate purchase price of $ 1.4 million in cash, or $ 9.55 per share.

In September 2022, Syros effected a one-for-ten reverse stock split of its outstanding common stock, adjusting our ownership to 93,753 shares of Syros’s common stock.

The fair market value of our long term investment in Syros as of December 31, 2022 and 2021 was $ 0.3 million and $ 3.1 million, respectively.

As of December 31, 2021, we owned approximately 2 % of the outstanding shares of Syros common stock.

We intend to hold the investment in Syros for the foreseeable future and therefore, are accounting for our shares held in Syros at fair value whereby the investment is marked to market through earnings in each reporting period.

We are accounting for our shares held in Syros at fair value whereby the investment is marked to market through earnings in each reporting period.

Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying consolidated balance sheets.

For the years ended December 31, 2021, 2020 and 2019, we recorded an unrealized loss of $ 7.1 million, an unrealized gain of $ 3.7 million and an unrealized gain of $ 1.3 million, respectively, based on the change in fair value of Syros’ common stock during the respective periods.

In December 2018, we entered into a Research Collaboration and Licensing Agreement with Innovent.

Under the terms of this agreement, Innovent received exclusive development and commercialization rights to our clinical-stage product candidates pemigatinib, itacitinib and parsaclisib in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

In January 2019, we recognized an upfront payment under this agreement of $ 40.0 million upon our transfer of the functional intellectual property related to the clinical-stage product candidates to Innovent, which was recorded in milestone and contract revenues on the consolidated statement of operations for the year ended December 31, 2019.

The upfront milestone was recognized as revenue at a point in time upon our transfer of the licenses to Innovent for the right to use the functional intellectual property.

In addition, we are eligible to receive up to an additional $ 94.0 million in potential development and regulatory milestones.

In 2021, we recognized a $ 10.0 million milestone for approval of PEMAZYRE (pemigatinib) in Taiwan.

In 2020, we recognized a $ 5.0 million milestone for the FDA approval of PEMAZYRE.

In 2019, we recognized a $ 20.0 million milestone for the first related IND filing in China.

In the event of commercialization of the licensed molecule, we are eligible to receive up to $ 202.5 million in potential sales milestones from Innovent.

We will recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Innovent.

We are also eligible to receive tiered royalties from the high-teens to the low-twenties on future sales of products resulting from the collaboration.

We retain an option to assist in the promotion of the three product candidates in the Innovent territories.

In July 2019, we entered into a Collaboration and License Agreement with Zai Lab.

For the years ended December 31, 2022, 2021 and 2020, we recorded an unrealized loss of $ 2.7 million, an unrealized loss of $ 7.1 million and an unrealized gain of $ 3.7 million, respectively, based on the change in fair value of Syros’ common stock during the respective periods.

In July 2019, we entered into a Collaboration and License Agreement with Zai Lab (Shanghai) Co., Ltd., a subsidiary of Zai Lab Limited (collectively, “Zai Lab”).

Under the terms of this agreement, Zai Lab received development and exclusive commercialization rights to INCMGA0012 in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

In 2019, we recognized an upfront payment under this agreement of $ 17.5 million upon our transfer of the functional intellectual property related to the clinical-stage product candidates to Zai Lab, which was recorded in milestone and contract revenues on the consolidated statement of operations for the year ended December 31, 2019.

The agreement allows for Zai Lab to continue development of the licensed molecule and to submit the licensed molecule to authorities for regulatory approval within the agreement territory, upon which we are eligible for up to $ 22.5 million in potential development and regulatory milestones.

In the event of commercialization of the licensed molecule, we are eligible to receive up to $ 37.5 million in potential sales milestones from Zai Lab.

We will recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Zai Lab.

We are also eligible to receive tiered royalties from the low to mid-twenties on future product sales resulting from the collaboration.

We also retain an option to assist in the promotion of INCMGA0012 in Zai Lab’s licensed territories.

In January 2020, we entered into a Collaboration and License Agreement with MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG (together with MorphoSys AG, “MorphoSys”), covering the worldwide development and commercialization of MOR208 (tafasitamab), an investigational Fc engineered monoclonal antibody directed against the target molecule CD19 that is currently in clinical development by MorphoSys.

In November 2022, Zai Lab sent us notice of its termination of the agreement, effective January 11, 2023.

MorphoSys has exclusive worldwide development and commercialization rights to tafasitamab under a June 2010 collaboration and license agreement with Xencor, Inc.

8 unchanged sentences

MorphoSys’ right to receive royalties in any particular country will expire upon the last to occur of (a) the expiration of patent rights in that particular country, (b) a specified period of time after the first post-marketing authorization sale of a licensed product comprising tafasitamab in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country.

In addition, under the terms of the agreement and pursuant to a related purchase agreement, we agreed to purchase American Depositary Shares (“ADSs”), each representing 0.25 of an ordinary share of MorphoSys AG, for an aggregate purchase price of $ 150.0 million or $ 41.33 per ADS (such ADSs to be purchased, the “New ADSs”).

As of December 31, 2022, we have paid MorphoSys milestones totaling $ 2.5 million, which was recorded as research and development expense in our consolidated statements of operations.

In addition, under the terms of the agreement and pursuant to a related purchase agreement, we purchased American Depositary Shares (“ADSs”), each representing 0.25 of an ordinary share of MorphoSys AG, for an aggregate purchase price of $ 150.0 million or $ 41.33 per ADS (such ADSs to be purchased, the “New ADSs”).

The fair market value of our long term investment in MorphoSys as of December 31, 2022 and 2021 was $ 13.0 million and $ 34.2 million, respectively.

As of December 31, 2021, we owned approximately 3 % of the outstanding shares of MorphoSys common stock.

We intend to hold the investment in MorphoSys for the foreseeable future and therefore, are accounting for our shares held in MorphoSys at fair value whereby the investment is marked to market through earnings in each reporting period.

We are accounting for our shares held in MorphoSys at fair value whereby the investment is marked to market through earnings in each reporting period.

Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying consolidated balance sheets.

For the year ended December 31, 2021 and 2020, we

recorded an unrealized loss of $ 68.7 million and an unrealized gain of $ 7.4 million, respectively, based on the change in fair value of MorphoSys’ common stock during the respective periods.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the years ended December 31, 2021 and 2020 was $ 37.0 million and $ 42.8 million, respectively, and is recorded as collaboration loss sharing on the consolidated statement of operations.

Research and development expenses for the year ended December 31, 2021 and 2020, included $ 77.0 million and $ 88.2 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

For the years ended December 31, 2022, 2021 and 2020 we recorded an unrealized loss of $ 21.2 million, an unrealized loss of $ 68.7 million, and an unrealized gain of $ 7.4 million, respectively, based on the change in fair value of MorphoSys’ common stock during the respective periods.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the years ended December 31, 2022, 2021 and 2020 was $ 8.0 million, $ 37.0 million, and $ 42.8 million respectively, and is recorded as (profit) and loss sharing under collaboration agreements on the consolidated statement of operations.

Research and development expenses for the years ended December 31, 2022, 2021 and 2020, included $ 99.7 million, $ 77.0 million, and $ 88.2 million, respectively, of costs for tafasitamab including our 55 % share of the co-development costs.

At December 31, 2022 and 2021, $ 28.5 million and $ 21.5 million, respectively, was included in accrued and other liabilities on the consolidated balance sheet for amounts due to MorphoSys under the agreement.

In September 2020, we entered into a Collaboration and License Agreement with Nimble Therapeutics, Inc.

Under the terms of this agreement, Nimble will utilize their peptide synthesis, screening and optimization platform for discovery and validation of peptides against specified targets.

Under the agreement, Nimble is eligible to receive up to $ 8.0 million in future contingent discovery milestones and up to $ 127.0 million in future contingent development and regulatory milestones.

Additionally, in the event of successful commercialization, Nimble is eligible to receive up to $ 130.0 million in future contingent sales milestones and tiered royalties on net sales in the low single digits.

In August 2021, we entered into a Collaboration and License Agreement with Sunny Investments Limited, a wholly-owned subsidiary of InnoCare Pharma Limited (“InnoCare”).

InnoCare received development and exclusive commercialization rights to tafasitamab in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

In September 2021, we recognized an upfront payment under this agreement of $ 35.0 million upon our transfer of technology related to the licensed product candidate to InnoCare, which was recorded in milestone and contract revenues on the consolidated statement of operations for the year ended December 31, 2021.

Under the terms of this agreement, we are eligible to receive up to an additional $ 45.0 million in potential development and regulatory milestones.

In the event of commercialization, we are eligible to receive up to $ 37.5 million in potential sales milestones from InnoCare.

We will recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by InnoCare.

We are also eligible to receive tiered royalties from the low to mid-twenties on future product sales resulting from the collaboration.

In September 2021, we entered into a Collaboration and License Agreement with Syndax Pharmaceuticals, Inc.

2 unchanged sentences

Syndax has exclusive worldwide development and commercialization rights to axatilimab under a June 2016 license agreement with UCB Biopharma Sprl.

The agreement became effective in December 2021 with the expiration of the initial waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

The agreement became effective in December 2021.

Under the terms of the agreement, we received exclusive commercialization rights outside of the United States, and Syndax and we have co-commercialization rights in the United States, with respect to axatilimab.

We will be responsible for leading the commercialization strategy and booking all revenue from sales of tafasitamab globally, and Syndax will have the option to co-commercialization axatilimab with Incyte in the United States.

We will be responsible for leading the commercialization strategy and booking all revenue from sales of axatilimab globally, and Syndax will have the option to co-commercialization axatilimab with Incyte in the United States.

Incyte and Syndax will share equally the profits and losses from the co-commercialization efforts in the United States.

2 unchanged sentences

Each company is responsible for funding any independent development activities.

All development costs related to the collaboration are subject to a

joint development plan.

In December 2021, we paid Syndax an upfront, non-refundable (except in the event of termination of the agreement as described below) payment of $ 117.0 million, which was recorded in research and development expense on the consolidated statement of operations for the year ended December 31, 2021.

All development costs related to the collaboration are subject to a joint development plan.

In December 2021, we paid Syndax an upfront, non-refundable payment of $ 117.0 million, which was recorded in research and development expense on the consolidated statement of operations for the year ended December 31, 2021.

Syndax is eligible to receive up to $ 220.0 million in future contingent development and regulatory milestones and up to $ 230.0 million in sales milestones as well as tiered royalties ranging in the mid-teens on net sales in Europe and Japan and low double digit percentage on net sales in the rest of the world outside of the United States.

Syndax’ right to receive royalties in any particular country will expire upon the last to occur of (a) the expiration of patent rights in that particular country, (b) a specified period of time after the first post-marketing authorization sale of a licensed product comprising tafasitamab in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country.

We have the sole right to terminate the agreement beginning March 23, 2022 in the event of any formal action by a relevant governmental authority to challenge the transactions under this agreement that occurs prior to that date.

If triggered, our right to terminate will expire on September 23, 2022.

Exercise of this termination right would require Syndax to refund all payments under the agreement, including the $ 117.0 million upfront payment and any payments for development costs.

In addition, under the terms of the agreement and pursuant to a related stock purchase agreement, we agreed to purchase approximately 1.4 million shares of common stock of Syndax for an aggregate purchase price of $ 35.0 million, or $ 24.62 per share.

We agreed, subject to limited exceptions, not to sell or otherwise transfer any of the shares for a six month period after the closing date of the sale.

Syndax’ right to receive royalties in any particular country will expire upon the last to occur of (a) the expiration of patent rights in that particular country, (b) a specified period of time after the first post-marketing authorization sale of a licensed product comprising axatilimab in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country.

In addition, under the terms of the agreement and pursuant to a related stock purchase agreement, we purchased approximately 1.4 million shares of Syndax common stock for an aggregate purchase price of $ 35.0 million, or $ 24.62 per share.

We completed the purchase of the shares on December 9, 2021 when the closing price on The Nasdaq Stock Market was $ 17.48 per share.

Of the $ 35.0 million aggregate purchase price paid, $ 24.8 million was allocated to our stock purchase and was recorded within long term investments and $ 10.2 million, representing premium paid on the purchase, was allocated to research and development expense on the consolidated statement of operations for the year ended December 31, 2021.

The fair market value of our long term investment in Syndax as of December 31, 2021 was $ 31.1 million.

As of December 31, 2021, we owned approximately 3 % of the outstanding shares of Syndax common stock.

We intend to hold the investment in Syndax for the foreseeable future and therefore, are accounting for our shares held in Syndax at fair value whereby the investment is marked to market through earnings in each reporting period.

The fair market value of our long term investment in Syndax as of December 31, 2022 and 2021 was $ 36.2 million and $ 31.1 million, respectively.

We are accounting for our shares held in Syndax at fair value whereby the investment is marked to market through earnings in each reporting period.

Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying consolidated balance sheets.

For the year ended December 31, 2021, we recorded an unrealized gain of $ 6.3 million based on the change in fair value of Syndax’s common stock during the period.

For the years ended December 31, 2022 and 2021, we recorded an unrealized gain of $ 5.1 million and $ 6.3 million, respectively, based on the change in fair value of Syndax’s common stock during the period.

CMS Aesthetics Limited

In December 2022, we entered into a Collaboration and License Agreement with CMS Aesthetics Limited, a dermatology medical aesthetic company and subsidiary of China Medical System Holdings Limited ("CMS"), for the development and commercialization of ruxolitinib cream for the treatment of autoimmune and inflammatory dermatologic diseases in Greater China and Southeast Asia.

In December 2022, we recognized an upfront payment under this agreement of $ 30.0 million upon our transfer of the functional intellectual property related to ruxolitinib cream to CMS, which was recorded in milestone and contract revenues on the consolidated statement of operations for the year ended December 31, 2022.

We are eligible to receive additional potential development and regulatory milestones, as well as sales milestones, and royalties on net sales of the licensed product in CMS’ territory.

CMS received an exclusive license to develop and commercialize and a non-exclusive license to manufacture ruxolitinib cream, and potentially other future topical formulations of ruxolitinib, in autoimmune and inflammatory dermatologic diseases, including vitiligo and atopic dermatitis, for patients in mainland China, Hong Kong, Macau, Taiwan and Southeast Asia.

Other Agreements

In addition to the license and collaboration agreements discussed above, we have various other license and collaboration agreements that are not individually material to our operating results or financial condition at this time.

Pursuant to the terms of those agreements, we may be required to pay, or we may receive, additional amounts contingent upon the occurrence of various future events such as future discovery, development, regulatory or commercial milestones, which in the aggregate could be material.

In addition, if any products related to these collaborations are approved for sale, we may be required to pay, or we may receive, royalties on future sales.

The payment or receipt of these amounts, however, is contingent upon the occurrence of various future events, the likelihood of which cannot presently be determined.

Property and Equipment, net

3 unchanged sentences

Computer equipment 92,115 79,871

Land 10,429 10,494

Building and leasehold improvements 564,170 434,321

1 unchanged sentence

Construction in progress 47,224 220,052

952,124 899,640

Less accumulated depreciation and amortization ( 212,814 ) ( 175,720 )

2 unchanged sentences

In March 2017, we acquired additional adjacent buildings to our global headquarters in Wilmington, Delaware and in 2019, began demolition of these buildings and construction of a new laboratory and office building totaling approximately 200,000 square feet.

The certificate of occupancy was received in December 2021 and we capitalized approximately $ 158.2 million in building and office equipment that was previously included in construction in progress as of December 31, 2021.

The certificate of occupancy was received in December 2021 and we capitalized approximately $ 158.2 million in building and office equipment.

In February 2018, we signed an agreement to rent a building in Morges, Switzerland for an initial term of 15 years plus one year of free rent, with multiple options to extend for an additional 20 years.

2 unchanged sentences

In June 2019, we obtained control of the Morges building to begin our construction activity, which was completed in 2020.

At that time, we determined the lease to be a finance lease and recorded a lease liability of $ 31.1 million and a finance lease right-of-use asset of $ 29.1 million, net of a lease incentive from our landlord of $ 2.0 million.

We determined the lease to be a finance lease and recorded a lease liability of $ 31.1 million and a finance lease right-of-use asset of $ 29.1 million, net of a lease incentive from our landlord of $ 2.0 million, at lease commencement.

We have capitalized approximately $ 20.1 million in leasehold improvements as of December 31, 2022 relating to Morges.

1 unchanged sentence

The land was purchased, in cash, for approximately $ 4.8 million.

Upon this parcel, we are constructing a large molecule production facility.

Construction activity commenced in July 2018, and as of December 31, 2021, we have capitalized approximately $ 197.4 million in costs for construction, ground preparation and architectural and engineering studies.

We currently expect the facility will be operational in the second half of 2022.

Upon this parcel, we constructed a large molecule production facility which received a GMP drug manufacturing license in June 2022 from Swissmedic authorities.

We capitalized approximately $ 176.2 million in building and approximately $ 79.7 million in laboratory equipment as of December 31, 2022.

We are the lessee of several contracts, including those to secure fleet vehicles, buildings and equipment.

8 unchanged sentences

The maturity of our lease liabilities are as follows (in thousands):

Operating Finance

2023 $ 9,060 $ 4,443

2024 5,171 3,828

2025 2,042 3,459

2026 1,521 3,036

2027 1,530 2,828

After 2027 5,995 23,665

Total lease cash payments $ 25,319 $ 41,259

discount 3,015 7,997

Present value of lease liabilities $ 22,304 $ 33,262

The cash paid for amounts included in the measurement of our operating lease liabilities for the years ended December 31, 2021 and 2020 was $ 14.3 million and $ 12.1 million, respectively, in operating cash flows.

The cash paid for amounts included in the measurement of our finance lease liabilities for the years ended December 31, 2021 and 2020 was $ 2.4 million and $ 0.8 million, respectively, in financing cash flows.

As of December 31, 2021, our finance and operating leases had a weighted average lease term of approximately 13.4 and 4.9 years, respectively.

The cash paid for amounts included in the measurement of our operating lease liabilities for the years ended December 31, 2022, 2021 and 2020 was $ 11.8 million, $ 14.3 million and $ 12.1 million, respectively, in operating cash flows.

The cash paid for amounts included in the measurement of our finance lease liabilities for the years ended December 31, 2022, 2021 and 2020 was $ 2.9 million, $ 2.4 million and $ 0.8 million respectively, in financing cash flows.

As of December 31, 2022, our finance and operating leases had a weighted average lease term of approximately 12.0 years and 5.5 years, respectively.

The discount rate of our leases is an approximation of an estimated incremental borrowing rate and is dependent upon the term and economics of each agreement.

The weighted average discount rate of our finance and operating leases is approximately 4.1 % and 4.8 %, respectively.

As of December 31, 2020, our finance and operating leases had a weighted average lease term of approximately 14.2 and 4.7 years, respectively.

The weighted average discount rate of our finance and operating leases is approximately 3.7 % and 4.7 %, respectively.

The weighted average discount rate of our finance and operating leases was approximately 4.2 % and 4.4 %, respectively.

As of December 31, 2021, our finance and operating leases had a weighted average lease term of approximately 13.4 years and 4.9 years, respectively.

The weighted average discount rate of our finance and operating leases was approximately 4.1 % and 4.8 %, respectively.

As of December 31, 2020, our finance and operating leases had a weighted average lease term of approximately 14.2 years and 4.7 years, respectively.

The weighted average discount rate of our finance and operating leases was approximately 3.7 % and 4.7 %, respectively.

For the year ended December 31, 2022, we incurred approximately $ 11.7 million of expense related to our operating leases, approximately $ 3.1 million of amortization on our finance lease right-of-use assets and approximately $ 1.4 million of interest expense on our finance lease liabilities.

For the year ended December 31, 2021, we incurred approximately $ 14.2 million of expense related to our operating leases, approximately $ 2.7 million of amortization on our finance lease right-of-use assets and approximately $ 1.3 million of interest expense on our finance lease liabilities.

For the years ended December 31, 2021 and 2020, the cost of our short term leases with a term less than 12 months was approximately $ 0.8 million and $ 1.9 million, respectively.

For the year ended December 31, 2020, we incurred approximately $ 12.5 million of expense related to our operating leases, approximately $ 2.6 million of amortization on our finance lease right-of-use assets and approximately $ 1.2 million of interest expense on our finance lease liabilities.

Intangible Assets and Goodwill

5 unchanged sentences

Lives (Years)

Amount Accumulated

Finite-lived intangible assets:

Licensed IP 12.5 $ 271,000 $ 141,781 $ 129,219 $ 271,000 $ 120,245 $ 150,755

Amortization expense was $ 21.5 million for the years ended December 31, 2022, 2021 and 2020 and is recorded in cost of product revenues on the consolidated statement of operations.

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets will be as follows for the years ending December 31 (in thousands):

2023 2024 2025 2026 2027 Thereafter

Amortization expense $ 21,536 $ 21,536 $ 21,536 $ 21,536 $ 21,536 $ 21,539

2 unchanged sentences

Accrued and other current liabilities consisted of the following (in thousands):

Royalties $ 263,466 $ 168,412

Clinical related costs 130,570 109,486

17 unchanged sentences

All options are exercisable at the fair market value of the stock on the date of grant.

Non-employee director options expire after ten years .

Non-employee director options expire after 10 years.

In May 2021, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Stock Plan from 44,453,475 to 53,953,475 .

2 unchanged sentences

Outstanding Options

Weighted Average

Shares Weighted Average

Exercise Price

Balance at December 31, 2021

12,763,460 $ 88.39

Options granted 1,856,979 $ 75.26

1 unchanged sentence

Options cancelled ( 1,338,726 ) $ 90.55

( 1,269,197 )

Balance at December 31, 2022

12,650,359 $ 87.25

In July 2016, we revised the terms of our annual stock option grants to provide that new option grants would generally have a 10 -year term and vest over four years , with 25 % vesting after one year and the remainder vesting in 36 equal monthly installments.

Previously, our option grants generally had 7 -year terms and vested over three years , with 33 % vesting after one year and the remainder vesting in 24 equal monthly installments.

Previously, our option grants generally had seven-year terms and vested over three years , with 33 % vesting after one year and the remainder vesting in 24 equal monthly installments.

Options to purchase a total of 8,952,289 , 8,024,951 and 6,732,942 shares as of December 31, 2022, 2021 and 2020, respectively, were exercisable.

The aggregate intrinsic value of options exercised for the years ended December 31,

2021, 2020 and 2019 were $ 12.7 million, $ 87.5 million and $ 113.8 million, respectively.

The aggregate intrinsic value of options exercised for the years ended December 31, 2022, 2021 and 2020 were $ 6.0 million, $ 12.7 million and $ 87.5 million, respectively.

At December 31, 2022, the aggregate intrinsic value of options outstanding and vested options are $ 36.9 million and $ 36.3 million, respectively.

The following table summarizes information about stock options outstanding as of December 31, 2022 under the 2010 Stock Plan:

Options Outstanding

Options Exercisable

Options Outstanding Options Exercisable

Range of Exercise Prices Number

Weighted Average

Contractual Life

Range of Exercise Prices

$ 22.74 - $ 71.35

8 unchanged sentences

1,645,035 7.03 83.43 935,300 83.47

$ 84.02 - $ 90.56

1,707,827 6.78 87.21 1,250,194 86.90

$ 90.92 - $ 95.76

1,541,768 3.43 94.98 1,473,044 95.10

$ 97.30 - $ 113.64

1,845,412 5.39 108.93 1,546,094 109.56

$ 115.19 - $ 134.38

638,135 4.17 128.75 638,135 128.75

$ 138.52 - $ 138.52

21,371 4.25 138.52 21,371 138.52

12,650,359 8,952,289

Restricted Stock Units and Performance Shares

11 unchanged sentences

Outstanding Awards

Grant Date Value

Shares Grant Date Value

Balance at December 31, 2021

3,966,888 $ 84.91

RSUs granted 2,527,740 $ 77.08

PSUs granted 154,685 $ 77.67

RSUs released ( 870,509 ) $ 86.75

3 unchanged sentences

Balance at December 31, 2022

5,187,592 $ 81.24

The following table summarizes our shares available for grant under the 2010 Plan.

2 unchanged sentences

Balance at December 31, 2021

Additional authorization

Options, RSUs and PSUs granted ( 7,222,187 )

( 7,174,371 )

Options, RSUs and PSUs cancelled 2,165,259

11 unchanged sentences

Stock compensation expense within the consolidated statements of operations also included cost of product revenues for the years ended December 31, 2022, 2021 and 2020 of $ 2.7 million, $ 1.7 million and $ 1.0 million, respectively.

For the years ended December 31, 2021, 2020 and 2019, we capitalized $ 2.1 million, $ 0.6 million and $ 0.4 million, respectively, of stock compensation expense as part of the cost of assets.

We utilized the Black-Scholes valuation model for estimating the fair value of the stock options granted, with the following weighted-average assumptions:

Employee Stock Options

Employee Stock Purchase Plan

For the year ended December 31,

Employee Stock Purchase Plan

For the year ended December 31,

2022 2021 2020 2022 2021 2020

Average risk-free interest rates 2.14 % 0.62 % 0.80 % 3.74 % 0.40 % 0.17 %

Average expected life (in years) 4.90 5.01 4.98 0.50 0.50 0.50

Volatility 36 % 39 % 40 % 25 % 33 % 45 %

Weighted-average fair value (in dollars) 26.06 29.03 32.65 14.99 18.02 19.13

6 unchanged sentences

Based on our historical experience of employee turnover, we have assumed an annualized forfeiture rate of 5 % for our options, PSUs and RSUs.

Under the true-up provisions of the stock compensation guidance, we will record additional expense as the awards vest if the actual forfeiture rate is lower than we estimated, and will record a recovery of

prior expense if the actual forfeiture is higher than we estimated.

Total compensation cost of options granted but not yet vested as of December 31, 2022, was $ 40.9 million, which is expected to be recognized over the weighted average period of 1.0 years.

3 unchanged sentences

federal, state and foreign corporate income taxes.

The (benefit) provision for income taxes is based on income (loss) before (benefit) provision for income taxes as follows (in thousands):

The provision (benefit) for income taxes is based on income (loss) before provision (benefit) for income taxes as follows (in thousands):

Year Ended December 31,

Income (loss) before (benefit) provision for income taxes

2022 2021 2020

$ 766,781 $ 991,873 $ ( 16,609 )

( 237,665 ) ( 421,429 ) ( 215,609 )

Income (loss) before provision (benefit) for income taxes $ 529,116 $ 570,444 $ ( 232,218 )

On a periodic basis, we reassess the valuation allowance on our deferred income tax assets.

10 unchanged sentences

deferred tax assets as well as select state and foreign deferred tax assets.

Our (benefit) provision for income taxes consists of the following (in thousands):

Our provision (benefit) for income taxes consists of the following (in thousands):

Year Ended December 31,

Total (benefit) provision for income taxes

2022 2021 2020

Federal $ 90,088 $ 50,565 $ 43,595

State 38,136 32,505 18,881

Foreign 3,141 4,397 1,353

131,365 87,467 63,829

Federal 62,107 ( 407,852 ) —

State ( 3,709 ) ( 57,677 ) —

Foreign ( 1,307 ) ( 75 ) ( 350 )

57,091 ( 465,604 ) ( 350 )

Total provision (benefit) for income taxes $ 188,456 $ ( 378,137 ) $ 63,479

A reconciliation of income taxes at the U.S.

federal statutory rate to the (benefit) provision for income taxes is as follows (in thousands):

federal statutory rate to the provision (benefit) for income taxes is as follows (in thousands):

Year Ended December 31,

2022 2021 2020

Provision (benefit) at U.S.

6 unchanged sentences

Stock based compensation 19,704 15,497 2,802

(Benefit) provision for income taxes

Acquisitions accounted for as research and development expenses 14,700 — —

Other 2,698 3,618 2,477

Provision (benefit) for income taxes $ 188,456 $ ( 378,137 ) $ 63,479

The foreign tax rate differential in the table above reflects the impact of operations in jurisdictions with tax rates that differ from the U.S.

10 unchanged sentences

Long term investments 54,662 34,733

Other 9,600 15,991

Total gross deferred tax assets 972,628 916,096

3 unchanged sentences

Property and equipment $ ( 33,683 ) $ ( 33,259 )

Other ( 8,879 ) ( 7,119 )

Total gross deferred tax liabilities ( 42,562 ) ( 40,378 )

Net deferred tax assets $ 457,941 $ 467,538

The valuation allowance for deferred tax assets decreased by approximately $ 522.0 million during the year ended December 31, 2021, increased by approximately $ 159.7 million during the year ended December 31, 2020 and decreased by approximately $ 66.5 million during the year ended December 31, 2019.

The net valuation allowance decrease during 2021 was primarily due to the valuation allowance release on the majority of our U.S.

deferred tax assets mentioned above.

As of December 31, 2021, we had net operating loss (“NOL”) carryforwards, research and development credit carryforwards and orphan drug tax credit carryforwards as follows (in thousands):

Expiring if not utilized

The valuation allowance for deferred tax assets increased by approximately $ 63.9 million during the year ended December 31, 2022, decreased by approximately $ 522.0 million during the year ended December 31, 2021.

The net valuation allowance increase during 2022 was primarily due to the generation of future deductible temporary differences mainly associated with U.S.

research and development expenses required to be capitalized and amortized under the Tax Cuts and Jobs Act of 2017, as well as foreign net operating losses (“NOLs”), which are not more-likely-than-not to be realized as of December 31, 2022.

As of December 31, 2022, we had NOL carryforwards, research and development credit carryforwards and orphan drug tax credit carryforwards as follows (in thousands):

Amount Expiring if not utilized

Net operating loss carryforwards

2022 through 2041;

2022 through 2028

State $ 257,806 2023 through 2041;

Foreign 1,692,283 2023 through 2029

Research and development credit carryforwards

2037 through 2041

2021 through 2040;

State 20,773 2024 through 2042;

Orphan drug tax credit carryforwards 14,641 2042

2036 through 2041

The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable taxing authority.

7 unchanged sentences

Additions related to current period tax positions 8,290 3,042

Settlements ( 104 ) ( 95 )

Reductions due to lapse of applicable statute of limitations ( 356 ) ( 288 )

2 unchanged sentences

Our policy is to recognize interest and penalties related to uncertain tax positions, if any, as a component of income tax expense.

During the year ending December 31, 2021, we recorded interest and penalties as a component of income tax expense of $ 0.6 million and during the year ended December 31, 2020, we recorded a negligible reduction to interest and penalties as a component of income tax expense.

During the years ending December 31, 2022 and 2021, we recorded interest and penalties as a component of income tax expense of $ 3.8 million and $ 0.6 million, respectively.

We do not anticipate any significant changes to our unrecognized tax benefits during the next twelve months.

4 unchanged sentences

Our basic net income (loss) per share is computed by dividing the net income (loss) by the number of weighted average common shares outstanding during the period.

Our diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average common shares outstanding during the period assuming potentially dilutive common shares of stock options, RSUs, PSUs and common shares issuable upon conversion of the 1.25 % convertible senior notes that matured in November 2020 (the “2020 Notes”) using the if-converted method.

Common shares issuable upon conversion of the 2020 Notes were excluded from the diluted net income (loss) per share computation for 2019 as their share effect was anti-dilutive.

Net income (loss) per share was calculated as follows for the periods indicated below:

12 unchanged sentences

The potential common shares that were excluded from the diluted net income (loss) per share computation are as follows:

2022 2021 2020

Outstanding stock options and awards 10,946,703 10,106,837 15,274,871

Common shares issuable upon conversion of the 1.25% Convertible Senior Notes due 2020

Total potential common shares excluded from diluted net income (loss) per share computation

Employee Benefit Plans

4 unchanged sentences

Defined contribution expense was $ 18.7 million, $ 16.7 million and $ 13.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Included in the 2021, 2020 and 2019 defined contribution expense was $ 2.4 million, $ 1.7 million and $ 1.6 million, respectively, of expense related to matching contributions under the non-U.S.

defined contribution plans.

Defined Benefit Pension Plans

12 unchanged sentences

Plan participants' contributions 3,649 2,795

Actuarial loss

Actuarial (gain) loss ( 33,783 ) 7,618

Plan change — 5,595

Transfer of benefits net of payments from fund 3,295 12,834

Expenses paid from assets ( 87 ) ( 117 )

Translation (gain) loss

Translation gain ( 1,441 ) ( 2,787 )

Benefit obligation, end of year 113,705 131,966

5 unchanged sentences

Expenses paid from assets ( 87 ) ( 117 )

Translation gain

Translation loss ( 1,189 ) ( 2,036 )

Fair value of plan assets, end of year 102,023 93,995

4 unchanged sentences

Year Ended December 31,

2022 2021 2020

Service cost $ 9,855 $ 7,977 $ 6,047

Interest cost 251 92 193

6 unchanged sentences

Year Ended December 31,

2022 2021 2020

Pension liability, beginning of year $ 23,677 $ 23,831 $ 15,468

2 unchanged sentences

Net (gain) loss ( 24,603 ) ( 5,954 ) 8,579

Pension liability, end of year

Pension (asset) liability, end of year $ ( 1,699 ) $ 23,677 $ 23,831

We expect to contribute a total of $ 8.0 million to the pension plans in 2023.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

The following payments are expected to be paid from the fund (in thousands):

2028-2031 42,436

Total $ 72,230

Commitments and Contingencies

6 unchanged sentences

Commitment fees payable on the undrawn amount range from 0.150 % per annum to 0.225 % per annum, based on our consolidated leverage ratio.

As of December 31, 2021, we are in compliance with all financial and operational covenants under the terms of the Credit Agreement and there were no outstanding borrowings or letters of credit outstanding.

We capitalized approximately $ 1.3 million in debt issuance costs related to the execution of the Credit Agreement.

The debt issuance costs are being amortized over the term of the facility.

As of December 31, 2022, we were in compliance with all financial and operational covenants under the terms of the Credit Agreement and there were no outstanding borrowings or letters of credit outstanding.

Contingencies

In December 2018, we received a civil investigative demand from the U.S.

Department of Justice (“DOJ”) for documents and information relating to our speaker programs and patient assistance programs, including our support of non-profit organizations that provide financial assistance to eligible patients.

In November 2019, the qui tam complaint underlying the DOJ inquiry was unsealed (“Complaint”), at which time we learned that a former employee whom we had terminated had made certain allegations relating to the programs described above.

We filed an Answer to the Complaint

on January 22, 2020 and on November 12, 2020 we filed a Motion for Summary Judgment (“Motion”).

All briefing on the Motion was completed on December 22, 2020.

While we deny that any improper claims were submitted to government payers, we agreed on May 4, 2021 to settle the matter with the DOJ Civil Division for $ 12.6 million, plus certain statutory fees, which was recorded in selling, general and administrative expense during the year ended December 31, 2021.

In the ordinary course of our business, we may become involved in lawsuits, proceedings, and other disputes, including commercial, intellectual property, regulatory, employment, and other matters.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data