What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-08-01 · 165 added, 142 removed, 524 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except number of shares and par value)

September 30,

2023 December 31,

1 unchanged sentence

Cash and cash equivalents $ 3,227,230 $ 2,951,422

Marketable securities—available-for-sale (amortized cost $ 294,371 and $ 292,580 as of June 30, 2023 and December 31, 2022, respectively;

allowance for credit losses $ 0 as of June 30, 2023 and December 31, 2022)

Marketable securities—available-for-sale (amortized cost $ 290,583 and $ 292,580 as of September 30, 2023 and December 31, 2022, respectively;

allowance for credit losses $ 0 as of September 30, 2023 and December 31, 2022)

289,223 287,543

32 unchanged sentences

400,000,000 shares authorized;

223,338,330 and 222,746,719 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

224,101,839 and 222,746,719 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 4,949,023 4,792,041

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

7 unchanged sentences

Selling, general and administrative 267,893 266,460 867,428 729,321

Loss on change in fair value of acquisition-related contingent consideration 8,374 3,313 14,570 9,695

(Profit) and loss sharing under collaboration agreements ( 549 ) 2,544 ( 1,911 ) 7,286

(Gain) loss on change in fair value of acquisition-related contingent consideration ( 426 ) ( 21,893 ) 14,144 ( 12,198 )

Loss and (profit) sharing under collaboration agreements 1,053 1,769 ( 858 ) 9,055

Total costs and expenses 704,320 684,927 2,249,053 1,958,588

2 unchanged sentences

Interest expense ( 623 ) ( 641 ) ( 1,747 ) ( 1,999 )

Unrealized gain (loss) on long term investments 41,811 ( 24,897 ) 36,493 ( 71,482 )

Unrealized (loss) gain on long term investments ( 26,654 ) ( 660 ) 9,839 ( 72,142 )

Income before provision for income taxes 233,799 148,588 563,259 448,501

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 171,269 $ 112,775 $ 396,520 $ 312,199

Other comprehensive income (loss):

Foreign currency translation gain (loss) 5,189 ( 1,837 ) 8,449 ( 2,619 )

Other comprehensive (loss) income:

Foreign currency translation (loss) gain ( 4,855 ) ( 2,513 ) 3,594 ( 5,132 )

Unrealized gain (loss) on marketable securities, net of tax 768 ( 1,135 ) 3,677 ( 5,322 )

Defined benefit pension gain, net of tax 175 282 554 846

Other comprehensive income (loss) 5,864 ( 2,649 ) 11,737 ( 6,242 )

Other comprehensive (loss) income ( 3,912 ) ( 3,366 ) 7,825 ( 9,608 )

Comprehensive income $ 167,357 $ 109,409 $ 404,345 $ 302,591

23 unchanged sentences

Balances at June 30, 2023 $ 223 $ 4,925,626 $ 26,806 $ ( 211,963 ) $ 4,740,692

Issuance of 762,231 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes

1 ( 24,682 ) — — ( 24,681 )

Issuance of 1,278 shares of Common Stock for services rendered

Stock compensation — 47,999 — — 47,999

Other comprehensive loss — — ( 3,912 ) — ( 3,912 )

Net income — — — 171,269 171,269

Balances at September 30, 2023 $ 224 $ 4,949,023 $ 22,894 $ ( 40,694 ) $ 4,931,447

INCYTE CORPORATION

23 unchanged sentences

Balances at June 30, 2022 $ 222 $ 4,688,985 $ ( 25,696 ) $ ( 578,450 ) $ 4,085,061

Issuance of 578,106 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes

— ( 13,572 ) — — ( 13,572 )

Issuance of 1,337 shares of Common Stock for services rendered

Stock compensation — 45,659 — — 45,659

Other comprehensive loss — — ( 3,366 ) — ( 3,366 )

Net income — — — 112,775 112,775

Balances at September 30, 2022 $ 222 $ 4,721,166 $ ( 29,062 ) $ ( 465,675 ) $ 4,226,651

See accompanying notes.

2 unchanged sentences

(unaudited, in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

6 unchanged sentences

Unrealized (gain) loss on long term investments ( 9,839 ) 72,142

Loss on change in fair value of acquisition-related contingent consideration 14,570 9,695

Loss (gain) on change in fair value of acquisition-related contingent consideration 14,144 ( 12,198 )

Changes in operating assets and liabilities:

6 unchanged sentences

Cash flows from investing activities:

Purchase of long term investments ( 10,000 ) —

Sale of long term investments 45 —

9 unchanged sentences

Payment of contingent consideration ( 18,114 ) ( 13,473 )

Net cash provided by financing activities 16,877 15,997

Net cash (used in) provided by financing activities ( 20,379 ) 1,686

Effect of exchange rates on cash, cash equivalents, restricted cash and investments 625 2,728

10 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

September 30, 2023

Organization and Business

5 unchanged sentences

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

The condensed consolidated balance sheet as of June 30, 2023, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and six months ended June 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The condensed consolidated balance sheet as of September 30, 2023, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and nine months ended September 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The condensed consolidated balance sheet at December 31, 2022 has been derived from our audited consolidated financial statements.

22 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

17 unchanged sentences

Losses Estimated

June 30, 2023

September 30, 2023

Debt securities (government) $ 290,583 $ ( 1,360 ) $ 289,223

3 unchanged sentences

Debt security assets were assessed for risk of expected credit losses.

As of June 30, 2023 and December 31, 2022, the available-for-sale debt securities were held in U.S.-government backed securities and in Treasury bonds and were assessed on an individual security basis to have a de minimis risk of credit loss.

As of September 30, 2023 and December 31, 2022, the available-for-sale debt securities were held in U.S.-government backed securities and in Treasury bonds and were assessed on an individual security basis to have a de minimis risk of credit loss.

Fair Value Measurements

10 unchanged sentences

government debt securities that are classified as available-for-sale.

At June 30, 2023 and December 31, 2022, our Level 2 U.S.

At September 30, 2023 and December 31, 2022, our Level 2 U.S.

government debt securities were valued using readily available pricing sources which utilize market observable inputs, including the current interest rate and other characteristics for similar types of investments.

Our long term investments classified as Level 1 were valued using their respective closing stock prices on The Nasdaq Stock Market.

We did not experience any transfers of financial instruments between the fair value hierarchy levels during the six months ended June 30, 2023.

We did not experience any transfers of financial instruments between the fair value hierarchy levels during the nine months ended September 30, 2023.

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

6 unchanged sentences

(Level 3) Balance as of

June 30, 2023

September 30, 2023

Cash and cash equivalents $ 3,227,230 $ — $ — $ 3,227,230

24 unchanged sentences

(Level 3) Balance as of

June 30, 2023

September 30, 2023

Acquisition-related contingent consideration $ — $ — $ 207,000 $ 207,000

13 unchanged sentences

Contingent consideration earned during the period but not yet paid ( 10,684 )

Payments made during the period ( 17,460 )

Change in fair value of contingent consideration 14,144

Balance at June 30, $ 217,000

Balance at September 30, $ 207,000

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 condensed consolidated statements of operations.

The valuation inputs utilized to estimate the fair value of the contingent consideration as of June 30, 2023 and December 31, 2022 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 loss on change in fair value of the contingent consideration during the three and six months ended June 30, 2023 was due primarily to the passage of time.

The valuation inputs utilized to estimate the fair value of the contingent consideration as of September 30, 2023 and December 31, 2022 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 three and nine months ended September 30, 2023 was due primarily to the changes in foreign currency exchange rates included within the updated projections of future net revenues of ICLUSIG and the passage of time.

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

At June 30, 2023 and December 31, 2022, contingent consideration earned but not yet paid was $ 18.6 million and $ 9.3 million, respectively, and was included in accrued and other current liabilities.

At September 30, 2023 and December 31, 2022, contingent consideration earned but not yet paid was $ 10.7 million and $ 9.3 million, respectively, and was included in accrued and other current liabilities.

Concentration of Credit Risk and Current Expected Credit Losses

2 unchanged sentences

In December 2009, we entered into a license, development and commercialization agreement with Eli Lilly and Company (“Lilly”).

The above collaboration partners comprised, in aggregate, 20 % and 20 % of the accounts receivable balance as of June 30, 2023 and December 31, 2022, respectively.

The above collaboration partners comprised, in aggregate, 21 % and 20 % of the accounts receivable balance as of September 30, 2023 and December 31, 2022, respectively.

For further information relating to these collaboration and license agreements, refer to Note 7.

In November 2011, we began commercialization and distribution of JAKAFI, in April 2020, we began commercialization and distribution of PEMAZYRE, and in October 2021, we began commercialization and distribution of OPZELURA.

Our product revenues are concentrated in a number of these customers.

Our product revenues are concentrated in a number of customers for these products.

The concentration of credit risk related to our JAKAFI, PEMAZYRE and OPZELURA product revenues is as follows:

3 unchanged sentences

Product Revenues for the

Six Months Ended

June 30, June 30,

Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

5 unchanged sentences

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 aggregate, 35 % and 41 % of the accounts receivable balance as of June 30, 2023 and December 31, 2022, respectively.

Customers A, B, C, D, and E comprised, in aggregate, 33 % and 41 % of the accounts receivable balance as of September 30, 2023 and December 31, 2022, 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 June 30, 2023 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.

As of June 30, 2023 and December 31, 2022, we had no allowance for doubtful accounts.

We assessed our collaborative and customer receivable assets as of September 30, 2023 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.

As of September 30, 2023 and December 31, 2022, we had no allowance for doubtful accounts.

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

September 30,

2023 December 31,

4 unchanged sentences

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

At June 30, 2023, $ 35.9 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months.

At June 30, 2023, $ 142.0 million of inventory was classified as non-current on the condensed consolidated balance sheet as we did not expect this inventory to be consumed for commercial use within the next twelve months.

At September 30, 2023, $ 57.2 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months.

At September 30, 2023, $ 142.1 million of inventory was classified as non-current on the condensed consolidated balance sheet as we did not expect this inventory to be consumed for commercial use within the next twelve months.

We obtain some inventory components from a limited number of suppliers due to technology, availability, price, quality or other considerations.

2 unchanged sentences

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

At June 30, 2023, inventory with approximately $ 32.6 million of product costs incurred prior to regulatory approval had not yet been sold.

At September 30, 2023, inventory with approximately $ 36.7 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 12 to 18 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

6 unchanged sentences

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”).

Since the inception of the agreement through June 30, 2023, 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.

Since the inception of the agreement through September 30, 2023, we have recognized and received, in the aggregate, $ 157.0 million for the achievement of development milestones, $ 345.0 million for the achievement of regulatory milestones, and $ 200.0 million for the achievement of sales milestones.

In September 2023, we recognized a $ 5.0 million regulatory milestone for the regulatory approval from the Japanese Ministry of Health, Labour and Welfare (MHLW) for the GVHD indication of JAKAVI (ruxolitinib).

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 contingent on certain conditions.

During the three and six months ended June 30, 2023, such royalties on net sales within the United States totaled $ 33.5 million and $ 56.9 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

During the three and six months ended June 30, 2022, such royalties on net sales within the United States totaled $ 29.3 million and $ 51.0 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

At June 30, 2023 and December 31, 2022, $ 310.3 million and $ 253.5 million, respectively, of accrued royalties were included in accrued and other current liabilities on the condensed consolidated balance sheets, payment of which is dependent on the outcome of a contract dispute with Novartis.

During the three and nine months ended September 30, 2023, such royalties on net sales within the United States totaled $ 31.1 million and $ 88.0 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

During the three and nine months ended September 30, 2022, such royalties on net sales within the United States totaled $ 30.3 million and $ 81.3 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

At September 30, 2023 and December 31, 2022, $ 341.5 million and $ 253.5 million, respectively, of accrued royalties were included in accrued and other current liabilities on the condensed 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.

Novartis is also responsible for all costs relating to the development and commercialization of capmatinib.

We had no milestone and contract revenue under the Novartis agreement for the three and six months ended June 30, 2023.

Milestone and contract revenue under the Novartis agreement was $ 60.0 million for both the three and six months ended June 30, 2022.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2023 was $ 90.4 million and $ 167.1 million, respectively.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2022 was $ 83.7 million and $ 154.6 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2023 was $ 4.8 million and $ 9.0 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2022 was $ 3.6 million and $ 7.1 million, respectively.

Milestone and contract revenue under the Novartis agreement was $ 5.0 million for both the three and nine months ended September 30, 2023.

We had no milestone and contract revenue under the Novartis agreement for the three months ended September 30, 2022, and we had $ 60.0 million for the nine months ended September 30, 2022.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and nine months ended September 30, 2023 was $ 96.6 million and $ 263.7 million, respectively.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and nine months ended September 30, 2022 was $ 85.8 million and $ 240.4 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and nine months ended September 30, 2023 was $ 4.1 million and $ 13.1 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and nine months ended September 30, 2022 was $ 4.1 million and $ 11.2 million, respectively.

Lilly – Baricitinib

2 unchanged sentences

Under this agreement, we were initially eligible to receive up to $ 150.0 million for the achievement of development milestones, up to $ 365.0 million for the achievement of regulatory milestones and up to $ 150.0 million for the achievement of sales milestones.

Since the inception of the agreement through June 30, 2023, 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.

Since the inception of the agreement through September 30, 2023, 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.

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.

1 unchanged sentence

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.

We had no milestone and contract revenue under the Lilly agreement for the three and six months ended June 30, 2023.

Milestone and contract revenue under the Lilly agreement was $ 70.0 million for both the three and six months ended June 30, 2022.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and six months ended June 30, 2023 was $ 32.0 million and $ 66.2 million, respectively.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and six months ended June 30, 2022 was $ 30.3 million and $ 78.3 million, respectively.

We had no milestone and contract revenue under the Lilly agreement for the three and nine months ended September 30, 2023.

We had no milestone and contract revenue under the Lilly agreement for the three months ended September 30, 2022, and we had $ 70.0 million for the nine months ended September 30, 2022.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and nine months ended September 30, 2023 was $ 29.6 million and $ 95.8 million, respectively.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and nine months ended September 30, 2022 was $ 20.4 million and $ 98.7 million, respectively.

Lilly - Ruxolitinib

6 unchanged sentences

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.

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 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.

Since the inception of the agreement through June 30, 2023, 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.

As of June 30, 2023, we held an investment of approximately 12.1 million shares of Agenus Inc.

Since the inception of the agreement through September 30, 2023, 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.

As of September 30, 2023, we held an investment of approximately 12.1 million shares of Agenus Inc.

common stock.

The fair market value of our long term investment in Agenus Inc.

at June 30, 2023 and December 31, 2022 was $ 19.3 million and $ 29.0 million, respectively.

For the three and six months ended June 30, 2023, we recorded an unrealized gain of $ 0.9 million and an unrealized loss of $ 9.7 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

For the three and six months ended June 30, 2022, we recorded an unrealized loss of $ 6.3 million and $ 15.4 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

at September 30, 2023 and December 31, 2022 was $ 13.6 million and $ 29.0 million, respectively.

For the three and nine months ended September 30, 2023, we recorded an unrealized loss of $ 5.6 million and $ 15.3 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

For the three and nine months ended September 30, 2022, we recorded an unrealized gain of $ 1.3 million and an unrealized loss of $ 14.1 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

During May 2023, Agenus Inc.

1 unchanged sentence

As a result, we acquired approximately 0.2 million shares of MiNK common stock.

The fair market value of our long term investment in MiNK at June 30, 2023 was $ 0.4 million, and during the three months ended June 30, 2023, and we recorded an unrealized gain of $ 0.2 million based on the change in fair value of MiNK’s common stock during the period.

The fair market value of our long term investment in MiNK at September 30, 2023 was $ 0.2 million.

During the three and nine months ended September 30, 2023, we recorded an unrealized loss of $ 0.2 million and a nominal unrealized gain, respectively, based on the change in fair value of MiNK’s common stock during the period.

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

1 unchanged sentence

The collaboration encompasses up to ten independent programs.

In January 2022, we decided to opt-out of the continued development of MCLA-145, a bispecific antibody targeting PD-L1 and CD137.

We continue to collaborate with Merus and leverage the Merus platform to develop a pipeline of novel agents, as we continue to hold worldwide exclusive development and commercialization rights to up to ten additional programs.

Of these ten additional programs, Merus retained the option, subject to certain conditions, to co-fund development of up to two such programs.

If Merus exercises its co-funding option for a program, Merus would be responsible for funding 35 % of the associated future global development costs and, for certain of such programs, would be responsible for reimbursing us for certain development costs incurred prior to the option exercise.

Merus will also have the right to participate in a specified proportion of detailing activities in the United States for one of those co-developed programs.

All costs related to the co-funded collaboration programs are subject to joint research and development plans and overseen by a joint development committee, but we will have final determination as to such plans in cases of dispute.

We will be responsible for all research, development and commercialization costs relating to all other programs.

For each program as to which Merus does not have commercialization or development co-funding rights, Merus is eligible to receive up to $ 100.0 million in future contingent development and regulatory milestones, and up to $ 250.0 million in commercialization milestones as well as tiered royalties ranging from 6 % to 10 % of global net sales.

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.

In January 2023, we paid Merus a milestone of $ 2.5 million, which was recorded as research and development expense in our condensed consolidated statements of operations during the three months ended March 31, 2023.

Since the inception of the agreement through June 30, 2023, we have paid and expensed Merus milestones totaling $ 5.5 million.

As of June 30, 2023, we held an investment of approximately 3.6 million common shares.

The fair market value of our total long term investment in Merus at June 30, 2023 and December 31, 2022 was $ 93.5 million and $ 54.9 million, respectively.

For the three and six months ended June 30, 2023, we recorded an unrealized gain of $ 28.2 million and $ 38.6 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

For the three and six months ended June 30, 2022, we recorded an unrealized loss of $ 13.5 million and $ 32.5 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

In August 2023, we paid Merus a milestone of $ 2.5 million, which was recorded as research and development expense in our condensed consolidated statements of operations during the three months ended September 30, 2023.

Since the inception of the agreement through September 30, 2023, we have paid and expensed Merus milestones totaling $ 8.0 million.

During August 2023, we purchased approximately 0.5 million shares of Merus’ common shares for an aggregate purchase price of $ 10.0 million in cash.

As of September 30, 2023, we held an investment of approximately 4.0 million common shares.

The fair market value of our total long term investment in Merus at September 30, 2023 and December 31, 2022 was $ 94.4 million and $ 54.9 million, respectively.

For the three and nine months ended September 30, 2023, we recorded an unrealized loss of $ 9.1 million and an unrealized gain of $ 29.5 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

For the three and nine months ended September 30, 2022, we recorded an unrealized loss of $ 9.3 million and $ 41.8 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

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

6 unchanged sentences

In March 2023, we made a $ 15.0 million regulatory milestone payment to MacroGenics for the FDA approval of ZYNYZ for the treatment of adults with Merkel cell carcinoma.

This milestone payment was capitalized as an intangible asset and included in Other intangible assets, net on the condensed consolidated balance sheet as of June 30, 2023, and is being amortized through cost of product revenues over the estimated useful life of 13.5 years.

Since the inception of the agreement through June 30, 2023, we have paid MacroGenics developmental and regulatory milestones totaling $ 115.0 million.

This milestone payment was capitalized as an intangible asset and included in Other intangible assets, net on the condensed consolidated balance sheet as of September 30, 2023, and is being amortized through cost of product revenues over the estimated useful life of 13.5 years.

Since the inception of the agreement through September 30, 2023, we have paid MacroGenics developmental and regulatory milestones totaling $ 115.0 million.

After the amendment and subsequent payments, MacroGenics will be eligible to receive up to an additional $ 320.0 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.

Research and development expenses for the three and six months ended June 30, 2023 also included $ 12.1 million and $ 29.9 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

Research and development expenses for the three and six months ended June 30, 2022 also included $ 14.8 million and $ 28.3 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

At June 30, 2023 and December 31, 2022, a total of $ 0.2 million and $ 2.9 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Research and development expenses for the three and nine months ended September 30, 2023 also included $ 12.9 million and $ 42.8 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

Research and development expenses for the three and nine months ended September 30, 2022 also included $ 41.6 million and $ 69.9 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

At September 30, 2023 and December 31, 2022, a total of $ 0.8 million and $ 2.9 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

In January 2018, we entered into a Target Discovery, Research Collaboration and Option Agreement with Syros Pharmaceuticals, Inc.

Under this agreement, Syros will use its proprietary gene control platform to identify novel therapeutic targets with a focus in myeloproliferative neoplasms and we have received options to obtain exclusive worldwide rights to intellectual property resulting from the collaboration for up to seven validated targets.

We will have exclusive worldwide rights to develop and commercialize any therapies under the collaboration that modulate those validated targets.

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.

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

As of June 30, 2023, we held an investment of approximately 0.1 million shares of Syros common stock.

The fair market value of our long term investment in Syros as of June 30, 2023 and December 31, 2022 was $ 0.3 million and $ 0.3 million, respectively.

For the three and six months ended June 30, 2023, we recorded a nominal unrealized loss and an unrealized loss of $ 0.1 million, respectively, based on the change in fair value of Syros’ common stock during the respective periods.

For the three and six months ended June 30, 2022, we recorded an unrealized loss of $ 0.2 million and $ 2.2 million, respectively, based on the change in fair value of Syros’ common stock during the respective periods.

Under this agreement, Syros would use its proprietary gene control platform to identify novel therapeutic targets with a focus in myeloproliferative neoplasms and we had received options to obtain exclusive worldwide rights to intellectual property resulting from the collaboration for up to seven validated targets.

In August 2023, we terminated the Target Discovery, Research Collaboration and Option Agreement with Syros, effective as of October 10, 2023.

As of September 30, 2023, we held an investment of approximately 0.1 million shares of Syros common stock.

The fair market value of our long term investment in Syros as of September 30, 2023 and December 31, 2022 was $ 0.4 million and $ 0.3 million, respectively.

For the three and nine months ended September 30, 2023, we recorded a unrealized gain of $ 0.1 million and a nominal unrealized gain, respectively, based on the change in fair value of Syros’ common stock during the respective periods.

For the three and nine months ended September 30, 2022, we recorded an unrealized loss of $ 0.3 million and $ 2.5 million, respectively, based on the change in fair value of Syros’ common stock during the respective periods.

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 was under clinical development by MorphoSys at the beginning of the agreement, and has subsequently been commercialized as MONJUVI/MINJUVI.

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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.

Since the inception of the agreement through June 30, 2023, we have paid MorphoSys milestones totaling $ 2.5 million, all of which have previously been recorded as research and development expenses.

As of June 30, 2023, we held an investment of approximately 3.6 million American Depository Shares, each representing 0.25 of an ordinary share of MorphoSys AG.

The fair market value of our long term investment in MorphoSys AG as of June 30, 2023 and December 31, 2022 was $ 27.1 million and $ 13.0 million, respectively.

For the three and six months ended June 30, 2023, we recorded an unrealized gain of $ 12.7 million and $ 14.1 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

For the three and six months ended June 30, 2022, we recorded an unrealized loss of $ 7.1 million and $ 16.7 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

Our 50 % share of the United States profit or loss for the commercialization of tafasitamab for the three and six months ended June 30, 2023 was a profit of $ 0.5 million and $ 1.9 million, respectively, and is recorded as (profit) and loss sharing under collaboration agreements on the condensed consolidated statement of operations.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the three and six months ended June 30, 2022 was $ 2.5 million and $ 7.3 million, respectively, and is recorded as (profit) and loss sharing under collaboration agreements on the condensed consolidated statement of operations.

Research and development expenses for the three and six months ended June 30, 2023, includes $ 20.3 million and $ 45.5 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

Research and development expenses for the three and six months ended June 30, 2022, includes $ 27.5 million and $ 48.5 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

At June 30, 2023 and December 31, 2022, $ 39.3 million and $ 28.5 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the agreement.

Since the inception of the agreement through September 30, 2023, we have paid MorphoSys milestones totaling $ 2.5 million, all of which have previously been recorded as research and development expenses.

As of September 30, 2023, we held an investment of approximately 3.6 million American Depository Shares, each representing 0.25 of an ordinary share of MorphoSys AG.

The fair market value of our long term investment in MorphoSys AG as of September 30, 2023 and December 31, 2022 was $ 24.4 million and $ 13.0 million, respectively.

For the three and nine months ended September 30, 2023, we recorded an unrealized loss of $ 2.7 million and an unrealized gain of $ 11.4 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

For the three and nine months ended September 30, 2022, we recorded an unrealized gain of $ 0.8 million and an unrealized loss of $ 15.9 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

Our 50 % share of the United States loss or profit for the commercialization of tafasitamab for the three and nine months ended September 30, 2023 was a loss of $ 1.1 million and profit of $ 0.9 million, respectively, and is recorded as loss and (profit) sharing under collaboration agreements on the condensed consolidated statement of operations.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the three and nine months ended September 30, 2022 was $ 1.8 million and $ 9.1 million, respectively, and is recorded as loss and (profit) sharing under collaboration agreements on the condensed consolidated statement of operations.

Research and development expenses for the three and nine months ended September 30, 2023, includes $ 13.0 million and $ 58.5 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

Research and development expenses for the three and nine months ended September 30, 2022, includes $ 21.9 million and $ 70.4 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

At September 30, 2023 and December 31, 2022, $ 12.4 million and $ 28.5 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the agreement.

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

(“Syndax”), covering the worldwide development and commercialization of SNDX-6352 (“axatilimab”).

Axatilimab, currently in clinical development by Syndax, is a monoclonal antibody that blocks the colony stimulating factor-1 (CSF-1) receptor.

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.

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 axatilimab globally.

Axatilimab, which is currently in clinical development, is a monoclonal antibody that blocks the colony stimulating factor-1 (CSF-1) receptor.

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

Under the terms of our agreement with Syndax, we received exclusive commercialization rights to axatilimab outside of the United States, and share commercialization rights in the United States.

We are responsible for leading the commercialization strategy and booking all revenue from sales of axatilimab globally.

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

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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 axatilimab in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country.

As of June 30, 2023, we held an investment of approximately 1.4 million shares of Syndax common stock.

The fair market value of our long term investment in Syndax as of June 30, 2023 and December 31, 2022 was $ 29.8 million and $ 36.2 million.

For the three and six months ended June 30, 2023, we recorded an unrealized loss of $ 0.2 million and $ 6.4 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

For the three and six months ended June 30, 2022, we recorded an unrealized gain of $ 2.7 million and an unrealized loss of $ 3.8 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

Research and development expenses for the three and six months ended June 30, 2023, includes $ 6.2 million and $ 11.8 million, respectively, related to our 55 % share of the co-development costs for axatilimab.

At June 30, 2023, $ 4.4 million was included in accrued and other liabilities on the condensed consolidated balance sheet for amounts due to Syndax under the agreement.

Syndax’s 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.

As of September 30, 2023, we held an investment of approximately 1.4 million shares of Syndax common stock.

The fair market value of our long term investment in Syndax as of September 30, 2023 and December 31, 2022 was $ 20.6 million and $ 36.2 million.

For the three and nine months ended September 30, 2023, we recorded an unrealized loss of $ 9.2 million and $ 15.6 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

For the three and nine months ended September 30, 2022, we recorded an unrealized gain of $ 6.8 million and $ 3.1 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

Research and development expenses for the three and nine months ended September 30, 2023, includes $ 5.1 million and $ 16.9 million, respectively, related to our 55 % share of the co-development costs for axatilimab.

At September 30, 2023, $ 7.3 million was included in accrued and other liabilities on the condensed consolidated balance sheet for amounts due to Syndax under the agreement.

Other Agreements

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Property and equipment, net consists of the following (in thousands):

September 30,

2023 December 31,

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

September 30,

2023 December 31,

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Stock Compensation

We recorded $ 54.5 million and $ 107.9 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2023, respectively.

We recorded $ 46.5 million and $ 90.3 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2022, respectively.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $ 32.8 million, $ 63.8 million, $ 28.1 million and $ 54.4 million for the three and six months ended June 30, 2023 and 2022, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $ 20.9 million, $ 42.5 million, $ 17.7 million and $ 34.6 million for the three and six months ended June 30, 2023 and 2022, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $ 0.8 million, $ 1.6 million, $ 0.7 million and $ 1.3 million, respectively, for the three and six months ended June 30, 2023 and 2022.

We recorded $ 48.0 million and $ 155.9 million of stock compensation expense on our condensed consolidated statements of operations for the three and nine months ended September 30, 2023, respectively.

We recorded $ 45.4 million and $ 135.7 million of stock compensation expense on our condensed consolidated statements of operations for the three and nine months ended September 30, 2022, respectively.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $ 26.9 million, $ 90.7 million, $ 25.8 million and $ 80.2 million for the three and nine months ended September 30, 2023 and 2022, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $ 20.3 million, $ 62.8 million, $ 18.9 million and $ 53.5 million for the three and nine months ended September 30, 2023 and 2022, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $ 0.8 million, $ 2.4 million, $ 0.7 million and $ 2.0 million, respectively, for the three and nine months ended September 30, 2023 and 2022.

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

Employee Stock Options Employee Stock Purchase Plan

For the Three Months Ended For the Six Months Ended For the Three Months Ended For the Six Months Ended

June 30, June 30,

For the Three Months Ended For the Nine Months Ended For the Three Months Ended For the Nine Months Ended

September 30, September 30,

2023 2022 2023 2022 2023 2022 2023 2022

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Options cancelled ( 950,614 ) $ 91.40

Balance at June 30, 2023 12,365,905 $ 86.72

Balance at September 30, 2023 12,792,623 $ 85.60

Our annual stock option grants 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.

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RSUs granted 3,510,406 $ 65.41

PSUs granted 300,512 $ 61.76

RSUs released ( 1,236,318 ) $ 83.57

PSUs released ( 108,712 ) $ 102.44

RSUs cancelled ( 303,726 ) $ 77.97

PSUs cancelled ( 52,392 ) $ 72.47

Balance at June 30, 2023 5,704,335 $ 80.77

Balance at September 30, 2023 7,297,362 $ 72.31

RSUs and PSUs are granted to our employees at the share price on the date of grant.

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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.

For the three and six months ended June 30, 2023 we recorded $ 2.7 million and $ 9.2 million, respectively, of stock compensation expense for PSUs on our condensed consolidated statements of operations.

For the three and six months ended June 30, 2022 we recorded $ 0.1 million and $ 1.9 million of stock compensation expense for PSUs on our condensed consolidated statements of operations.

For the three and nine months ended September 30, 2023 we recorded $ 4.2 million and $ 13.4 million, respectively, of stock compensation expense for PSUs on our condensed consolidated statements of operations.

For the three and nine months ended September 30, 2022 we recorded $ 3.2 million and $ 5.1 million of stock compensation expense for PSUs on our condensed consolidated statements of operations.

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

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Options, RSUs and PSUs cancelled 1,662,566

Balance at June 30, 2023 16,202,332

Balance at September 30, 2023 10,272,447

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

Under the true-up provisions of the stock compensation guidance, we will record additional expense 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 June 30, 2023, was $ 34.5 million, which is expected to be recognized over the weighted average period of approximately 1.1 years.

Total compensation cost of RSUs granted but not yet vested, as of June 30, 2023, was $ 175.0 million, which is expected to be recognized over the weighted average period of approximately 1.6 years.

Total compensation cost of PSUs granted but not yet vested, as of June 30, 2023, was $ 28.2 million, which is expected to be recognized over the weighted average period of 1.4 years, should the underlying performance conditions be deemed probable of achievement.

For the three and six months ended June 30, 2023 and 2022, we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for income taxes:

Total compensation cost of options granted but not yet vested, as of September 30, 2023, was $ 37.1 million, which is expected to be recognized over the weighted average period of approximately 1.2 years.

Total compensation cost of RSUs granted but not yet vested, as of September 30, 2023, was $ 278.1 million, which is expected to be recognized over the weighted average period of approximately 2.0 years.

Total compensation cost of PSUs granted but not yet vested, as of September 30, 2023, was $ 24.1 million, which is expected to be recognized over the weighted average period of 2.1 years, should the underlying performance conditions be deemed probable of achievement.

For the three and nine months ended September 30, 2023 and 2022, we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for income taxes (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Effective tax rate 26.7 % 24.1 % 29.6 % 30.4 %

Our effective tax rate for each of the three and six months ended June 30, 2023 and 2022 was higher than the U.S.

Our effective tax rate for each of the three and nine months ended September 30, 2023 and 2022 was higher than the U.S.

statutory rate primarily due to foreign losses with no associated tax benefit (i.e., full valuation allowance) and an increase in our valuation allowance against certain U.S.

federal and state deferred tax assets offset to a lesser extent by tax rate benefits associated with research and development and orphan drug tax credit generations and foreign derived intangible income deductions.

The effective tax rate for the three and six months ended June 30, 2023 decreased as compared to that for the prior year periods due to a greater tax benefit recognized in 2023 associated with research and development and orphan drug tax credit generations.

The balance of our unrecognized tax benefits (including penalties and interest) decreased marginally during the six months ended June 30, 2023.

This movement was primarily driven by additions to current and prior period tax positions of $ 4.2 million, as well as $ 2.8 million of interest and penalties, offset by reductions related to prior period tax positions of $ 7.1 million.

The effective tax rate for the three months ended September 30, 2023 increased as compared to the prior year period primarily due to an increase in foreign losses with no associated tax benefit.

The effective tax rate for the nine months ended September 30, 2023 decreased as compared to the prior year period primarily due to greater tax benefits recognized in 2023 associated with research and development and orphan drug tax credit generations, partially offset by a decrease in the tax benefit associated with foreign derived intangible income.

The balance of our unrecognized tax benefits (including penalties and interest) decreased by $ 2.1 million during the nine months ended September 30, 2023.

This movement was primarily driven by reductions related to prior period tax positions of $ 10.1 million, offset by additions to current and prior period tax positions of $ 5.3 million, as well as $ 2.7 million of interest and penalties.

We accrue interest and penalties related to unrecognized tax benefits as a component of its provision for income taxes.

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The IRA includes a 15% corporate alternative minimum tax and a 1% excise tax on share repurchases.

We do not expect the IRA to have a material impact on our consolidated financial statements.

We do not expect the IRA's tax provisions to have a material impact on our consolidated financial statements.

Net Income Per Share

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations.

Defined contribution expense for the three and six months ended June 30, 2023 was $ 4.0 million and $ 9.6 million, respectively.

Defined contribution expense for the three and six months ended June 30, 2022 was $ 4.7 million and $ 9.6 million, respectively.

Defined contribution expense for the three and nine months ended September 30, 2023 was $ 5.0 million and $ 14.6 million, respectively.

Defined contribution expense for the three and nine months ended September 30, 2022 was $ 5.1 million and $ 14.7 million, respectively.

Defined Benefit Pension Plans

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

13 unchanged sentences

We record a reserve for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We brought a lawsuit against the U.S.

Centers for Medicare and Medicaid Services (“CMS”) alleging that a recent regulation issued by CMS on the definition of “line extension” for purposes of the Medicaid rebate program is too broad and has the unintended consequence of treating OPZELURA as a “line extension” of JAKAFI under this program.

We believe that such a reading would be a violation of CMS’s statutory authority and that it would be arbitrary and capricious to treat OPZELURA which, among other differentiators, is indicated to treat entirely different medical conditions and entirely different patient populations than JAKAFI.

As of September 30, 2023, we have accrued approximately $ 42.9 million within accrued and other current liabilities on the condensed consolidated balance sheet.

The impact on OPZELURA gross to net deductions for the quarter ending September 30, 2023 is approximately 6.6 %.

If OPZELURA is not treated as a line extension of JAKAFI, this would result in a reversal of our accrual and a lower future gross to net deduction for OPZELURA.

In addition, we have an outstanding contractual dispute with Novartis relating to royalties on JAKAFI net sales within the United States.

Refer to Note 7.

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-Q

Item 1. Financial Statements