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Item 7. Management’s Discussion and Analysis

2024-02-13 compared with 2023-02-07 · 57 added, 99 removed, 236 unchanged (40% of the section changed)

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None of the materials on, or accessible through, these websites are part of this report or are incorporated by reference herein.

Incyte is a biopharmaceutical company focused on the discovery, development and commercialization of proprietary therapeutics.

Our global headquarters is located in Wilmington, Delaware, where we conduct global clinical development and commercial operations.

We also conduct clinical development and commercial operations from our European headquarters in Morges, Switzerland and our other offices across Europe, our Japanese office in Tokyo and our Canadian headquarters in Montreal.

Our portfolio focuses on areas of high unmet medical need and includes compounds in various stages, ranging from preclinical to late stage development, and commercialized products JAKAFI® (ruxolitinib), ICLUSIG® (ponatinib), PEMAZYRE® (pemigatinib) and OPZELURA™ (ruxolitinib) cream, as well as MINJUVI® (tafasitamab) and MONJUVI® (tafasitamab-cxix), which are co-commercialized.

Incyte is a global biopharmaceutical company engaged in the discovery, development and commercialization of proprietary therapeutics.

We are focused in two therapeutic areas that are defined by the indications of our approved medicines and the diseases for which our clinical candidates are being developed.

One therapeutic area is Hematology/Oncology, which comprises Myeloproliferative Neoplasms (MPNs), Graft-Versus-Host Disease (GVHD), solid tumors and hematologic malignancies.

The other therapeutic area is Inflammation and Autoimmunity (IAI), which includes our Dermatology commercial franchise.

We are also eligible to receive milestones and royalties on molecules discovered by us and licensed to third parties.

Our global headquarters is located in Wilmington, Delaware, where we conduct discovery, clinical development and commercial operations.

We also conduct clinical development and commercial operations from our European headquarters in Morges, Switzerland and our other offices across Europe, as well as our Japanese office in Tokyo and our Canadian headquarters in Montreal.

Our portfolio focuses on areas of high unmet medical need and includes compounds in various stages, ranging from preclinical to late stage development, and commercialized products JAKAFI (ruxolitinib), ICLUSIG (ponatinib), PEMAZYRE (pemigatinib) and OPZELURA (ruxolitinib) cream, as well as MINJUVI (tafasitamab) and MONJUVI (tafasitamab-cxix), which prior to our February 2024 acquisition of global rights to tafasitamab, were co-commercialized, and ZYNYZ (retifanlimab-dlwr).

Our revenues depend on continued sales of our products, and we depend substantially on product revenues from JAKAFI.

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See Part I, Item 1A of this report, “Risk Factors” for a further discussion of certain factors that could impact our future product revenues.

Effects of the COVID-19 Pandemic on Our Business

The impact of the COVID-19 pandemic on our operational and financial performance going forward depends on numerous factors, all of which are difficult to predict.

These include the duration, spread and intensity of the pandemic;

the protective measures imposed (or reimposed) by governmental authorities or by us to protect our employees;

and the effects of the pandemic and such protective measures on our suppliers, collaborators and services providers and on the healthcare organizations serving patients.

As a result, it is not currently possible to ascertain the potential long term impact of the COVID-19 pandemic on our business.

To date, however, we have not experienced a material effect on the results of our commercial operations, or our manufacturing supply chain.

New patient starts for treatment decreased as a result of shelter in place and other protective measures in the early stages of the pandemic, and if decreases in new patient starts occur in future periods, our revenues in future periods could be adversely affected.

We continue to anticipate that short-term effects may continue to emerge across different aspects of our global clinical trial programs.

For example, while we expect ongoing monitoring of already-enrolled patients to continue, difficulties in monitoring may result as a consequence of any new shelter in place orders and other protective measures implemented by governmental authorities or clinical trial sites.

In addition, new patient recruitment in certain clinical trials has been and may in the future be impacted, in particular with respect to our earlier stage clinical trials.

We also expect the conduct of clinical trials may continue to vary by disease state and by severity of disease, as well as by geography, as some regions are more adversely impacted.

Overall, we caution that the duration and severity of the continuing COVID-19 pandemic remains uncertain, and we may not yet be able to assess its consequences accurately or fully at this time.

Regulatory Achievements

In May 2022, under our collaboration agreement with Novartis International Pharmaceutical Ltd., the European Commission (EC) approved JAKAVI (ruxolitinib) for the treatment of patients aged 12 years and older with acute and chronic GVHD and who have inadequate response to corticosteroids or other systemic therapies.

JAKAVI is the first Janus kinase (JAK)1/2 inhibitor available for patients with GVHD in Europe.

In May 2022, under our collaboration agreement with Eli Lilly and Company, the U.S.

Food and Drug Administration (FDA) approved OLUMIANT for the treatment of COVID-19 in hospitalized adults requiring supplemental oxygen, non-invasive or invasive mechanical ventilation, or extracorporeal membrane oxygenation with a recommended dose of 4-mg once daily for 14 days or until hospital discharge, whichever comes first.

OLUMIANT is the first and only JAK inhibitor FDA-approved for the treatment of COVID-19 in certain hospitalized adults requiring various degrees of oxygen support.

In June 2022, under our collaboration agreement with Novartis, the EC approved TABRECTA (capmatinib) as a monotherapy for the treatment of adults with advanced non-small cell lung cancer NSCLC) harboring alterations leading to mesenchymalepithelial-transition factor gene (MET) exon 14 (METex14) kipping who require systemic therapy following prior treatment with immunotherapy and/or platinum-based chemotherapy.

In June 2022, under our collaboration agreement with Lilly, the FDA approved OLUMIANT as the first and only systemic treatment for adults with severe alopecia areata (AA).

In June 2022, the EC approved OLUMIANT as the first and only centrally-authorized treatment for adults with severe AA in Europe.

In June 2022, the Japan Ministry of Health, Labor and Welfare approved OLUMIANT as a treatment for adults with alopecia areata.

In July 2022, the FDA approved OPZELURA (ruxolitinib) cream for the topical treatment of nonsegmental vitiligo in adult and pediatric patients 12 years of age and older.

OPZELURA is the first and only FDA-approved treatment for repigmentation in patients with vitiligo, and the only topical formulation of a JAK inhibitor approved in the United States.

In August 2022, the FDA approved PEMAZYRE for the treatment of adults with relapsed or refractory myeloid/ lymphoid neoplasms (MLNs) with FGFR1 rearrangement.

PEMAZYRE is the first and only targeted treatment for MLNs with FGFR1 rearrangement.

MLNs with FGFR1 rearrangement are extremely rare and aggressive blood cancers that may impact less than 1 in 100,000 people in the United States.

In December 2022, the FDA approved a supplemental new drug application (sNDA) for revisions to JAKAFI labelling to update the Pediatric Use section of the Prescribing Information to describe the available experience of ruxolitinib in pediatric patients based on data from a study in children with de novo high-risk CRLF2-rearranged and/or JAK pathway-mutant acute lymphoblastic leukemia.

In March 2023, under our collaboration agreement with MacroGenics, we received FDA approval of ZYNYZ for the treatment of adults with Merkel cell carcinoma.

In April 2023, the European Commission granted a marketing authorization for OPZELURA(ruxolitinib) cream 15mg/g for the treatment of non-segmental vitiligo with facial involvement in adults and adolescents from 12 years of age.

In September 2023, under our collaboration agreement with Novartis, we received the regulatory approval of JAKAVI (ruxolitinib) in GVHD by the Japanese Ministry of Health, Labour and Welfare.

In December 2023, the BLA was submitted for axatilimab in chronic graft-versus-host disease for the treatment of patients with chronic GVHD after failure of two or more lines of systemic therapy.

License Agreements, Business Relationships and Acquisitions

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We also establish business relationships with other companies and medical research institutions to acquire products or rights to products and technologies that are complementary to our business.

Summarized below are the significant achievements under our existing collaboration and license agreements and additional agreements we entered into during the year ended December 31, 2022.

In March 2022, we recognized a $5.0 million milestone under our collaboration and licensing agreement with Innovent Biologics, Inc., for approval for PEMAZYRE in China for the treatment of adults with locally advanced or metastatic cholangiocarcinoma, which was recorded in milestone and contract revenues.

In June 2022, we recognized $70.0 million in regulatory milestones for Eli Lilly and Company gaining approval of OLUMIANT in the United States, Europe and Japan for the treatment of alopecia areata.

In April 2022, we entered into a Strategic Alliance Agreement with Maruho Co., Ltd for the development, manufacturing and exclusive commercialization of ruxolitinib cream, a novel cream formulation of Incyte’s selective JAK2 inhibitor ruxolitinib, for treatment of autoimmune and inflammatory dermatology indications in Japan.

Under the terms of the agreement, we recognized an upfront payment and are eligible to receive additional potential development, regulatory and commercial milestones and royalties on net sales of the licensed product in Japan.

Maruho will receive the rights to develop, manufacture and exclusively commercialize ruxolitinib cream, and other potential future topical formulations of ruxolitinib, in autoimmune and inflammatory dermatologic diseases, including vitiligo and atopic dermatitis, in Japan.

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 European Medicines Agency (EMA) that recommended 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.

In November 2022, we acquired Villaris Therapeutics, Inc., an asset-centric biopharmaceutical company focused on the development of novel antibody therapeutics for vitiligo.

Its lead asset, auremolimab (VM6), is an anti-IL-15Rβ monoclonal antibody (mAb).

Under the terms of the agreement, we paid an upfront payment of $70 million, and former Villaris stockholders will be eligible for 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 the product.

CMS Aesthetics Limited

In December 2022, we entered into a Collaboration and License Agreement with CMS Aesthetics Limited, a subsidiary of China Medical System Holdings Limited, for the development and commercialization of ruxolitinib cream, a novel cream formulation of Incyte’s selective JAK inhibitor ruxolitinib, for the treatment of autoimmune and inflammatory dermatologic diseases in Greater China and Southeast Asia.

Under the terms of the agreement, CMS paid us an upfront payment of $30.0 million upon our transfer of the functional intellectual property related to ruxolitinib cream to CMS, and we are eligible to receive additional potential development, regulatory and commercial 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.

Critical Accounting Policies and Significant Estimates

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Product Revenues

Our product revenues consist of sales of JAKAFI, OPZELURA, PEMAZYRE, ICLUSIG, and MINJUVI.

Our product revenues consist of sales of JAKAFI, OPZELURA, ICLUSIG, PEMAZYRE, MINJUVI, and ZYNYZ.

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

We recognize revenues for product received by our customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and government rebates, such as Medicare Part D coverage gap reimbursements in the United States.

We recognize revenues for product received by our customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and government rebates, such as the Medicaid Drug Rebate Program and Medicare Part D coverage gap reimbursements in the United States.

These sales allowances and accruals are recorded based on estimates which are described in detail below.

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

Additionally, beginning in January 2020, the amount of spending required by eligible patients in the Medicare Part D insurance coverage gap increased 30% due to the expiration of a provision in the Patient Protection and Affordable Care Act, which now results in a change in the True Out of Pocket (TrOOP) calculation methodology.

The methodological change has resulted in an increase in required spending by patients and, in turn, an increase in manufacturers’ contributions on behalf of patients in the Medicare Part D insurance coverage gap.

Co-payment Assistance:

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deferred tax assets in 2021, we expect that our reported income tax expense (current plus deferred) for future periods will be higher than that recorded for prior periods.

Acquisition-related contingent consideration.

Acquisition-related contingent consideration, which consists of our future royalty obligations to ARIAD/Takeda, was recorded on the acquisition date at the estimated fair value of the obligation, in accordance with the acquisition method of accounting using an income approach based on projected future net revenues of ICLUSIG in the European Union and other countries.

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.

The assumptions used to determine the fair value of the acquisition-related contingent consideration include projected future net revenues of ICLUSIG and a discount rate, which require significant judgement and are analyzed on a quarterly basis.

As the fair value measurement is based on significant inputs that are unobservable in the market, this represents a Level 3 measurement.

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.

While we use the best available information to prepare our projections of future net revenues of ICLUSIG and discount rate assumptions, actual ICLUSIG revenues and/or market conditions could differ significantly.

Changes to one or multiple inputs could have a material impact on the amount of acquisition-related contingent consideration expense recorded during the reporting period.

Results of Operations

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On a per share basis, basic net income was $1.53 and diluted net income was $1.52 for the year ended December 31, 2022.

For the year ended December 31, 2021, we recorded a benefit from income taxes of $569.0 million when we released the valuation allowance on the majority of our U.S.

deferred tax assets.

This benefit increased net income by $2.58 per basic and $2.56 per diluted share for the year ended December 31, 2021.

For the Year Ended,

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JAKAFI revenues, net $ 2,593.7 $ 2,409.2

OPZELURA revenues, net 337.9 128.7

ICLUSIG revenues, net 111.6 105.8

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MINJUVI revenues, net 37.1 19.7

OPZELURA revenues, net 128.7 4.7

ZYNYZ revenues, net 1.3 —

Total product revenues, net 3,165.2 2,746.9

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The increase in JAKAFI product revenues from 2022 to 2023 was comprised of a volume increase of $135.3 million and a price increase of $49.2 million.

The increase in OPZELURA product revenues in 2022 was driven by the full year sales volume impact of the launch of OPZELURA following the September 2021 FDA approval for the treatment of atopic dermatitis and, subsequently, for the treatment of vitiligo in July 2022.

The increase in OPZELURA net product revenues from 2022 to 2023 was driven by growth in patient demand, refills and expansion in payer coverage as the launch in atopic dermatitis and vitiligo continues.

Our product revenues may fluctuate from period to period due to our customers’ purchasing patterns over the course of a year, including as a result of increased inventory building by customers in advance of expected or announced price increases.

Product revenues are recorded net of estimated product returns, pricing discounts including rebates offered pursuant to mandatory federal and state government programs and chargebacks, prompt pay discounts and distribution fees and co-pay assistance.

Product revenues are recorded net of sales allowances.

Our revenue recognition policies require estimates of the aforementioned sales allowances each period.

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We adjust our estimates for government rebates and chargebacks based on new information regarding actual rebates as it becomes available.

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 violate CMS's statutory authority and be arbitrary and capricious, given that OPZELURA, among other differentiators, is indicated to treat entirely different medical conditions and entirely different patient populations than JAKAFI.

As of December 31, 2023, we have accrued approximately $59.5 million within accrued and other current liabilities on the consolidated balance sheet, relating to the incremental rebates that would be owed were OPZELURA considered a line extension of JAKAFI.

The impact on OPZELURA gross to net deductions for the quarter ending December 31, 2023, is approximately 6.5%.

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.

Claims by third-party payors for rebates and chargebacks are frequently submitted after the period in which the related sales occurred, which may result in adjustments to prior period accrual balances in the period in which the new information becomes available.

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Product royalty revenues on commercial sales of JAKAVI and TABRECTA by Novartis are based on net sales of licensed products in licensed territories as provided by Novartis.

The decrease in JAKAVI product royalty revenues for the year ended December 31, 2022 as compared to the corresponding period in 2021 reflects unfavorable changes in foreign currency exchange rates.

Product royalty revenues on commercial sales of OLUMIANT by Lilly are based on net sales of licensed products in licensed territories as provided by Lilly.

The decrease in OLUMIANT product royalty revenues for the year ended December 31, 2022 as compared to the corresponding period in 2021 reflects unfavorable changes in foreign currency exchange rates and a decrease in net product sales of OLUMIANT for use as a treatment for COVID-19.

The increase in OLUMIANT product royalty revenues for the year ended December 31, 2023 as compared to the corresponding period in 2022 includes unfavorable changes in foreign currency exchange rates.

Product royalty revenues on commercial sales of PEMAZYRE by Innovent are based on net sales of licensed products in licensed territories as provided by Innovent.

Our milestone and contract revenues were $7.0 million and $165.0 million for the years ended December 31, 2023 and 2022, respectively.

During the year ended December 31, 2023, our milestone and contract revenues were primarily derived from a regulatory milestone under the Novartis collaboration and license agreement.

During the year ended December 31, 2022, our milestone and contract revenues were derived from total regulatory milestones achieved of $135.0 million, in addition to a $30.0 million upfront payment received upon our transfer of functional intellectual property to one of our collaboration partners.

During the year ended December 31, 2021, our milestone and contract revenues were derived from the achievement of a $50.0 million sales milestone, a $10.0 million regulatory milestone, and $35.0 million upfront payment received upon our transfer of functional intellectual property to one of our collaboration partners.

Cost of Product Revenues

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Total cost of product revenues $ 255.0 $ 207.0

Cost of product revenues includes all product related costs, employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial products, royalties owed under our collaborative agreements and amortization of our licensed intellectual property rights for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years.

Cost of product revenues increased from 2021 to 2022 due primarily to product related costs for our commercial products, including OPZELURA.

Cost of product revenues includes all product related costs, reserves for obsolescence, employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial products, royalties owed under our collaborative agreements and amortization of our licensed intellectual property rights for ICLUSIG and the amortization of capitalized milestone payments.

Cost of product revenues increased from 2022 to 2023 due primarily to growth in net product revenues and inventory reserves for obsolescence.

Operating Expenses

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Stock compensation expense may fluctuate from period to period based on the number of awards granted, stock price volatility and expected award lives, as well as expected award forfeiture rates which are used to value equity-based compensation.

The increase in clinical research and outside services expense from 2021 to 2022 was primarily due to continued investment in our late stage development assets.

Research and development expenses also include upfront and milestone expenses related to our collaborative agreements and the acquisition of Villaris, which were $126.0 million and $149.0 million for the years ended December 31, 2022 and 2021, respectively.

The decrease in clinical research and outside services expense from 2022 to 2023 was primarily due to a decrease in one-time collaboration related expenses.

The increase in total research and development expense from 2022 to 2023 was primarily due to continued investment in our late stage development assets.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements and the asset acquisition of Villaris in 2022, which were $36.7 million and $126.0 million for the years ended December 31, 2023 and 2022, respectively.

Research and development expenses for the years ended December 31, 2023 and 2022 were net of $49.1 million and $52.2 million, respectively, of costs reimbursed by our collaborative partners.

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The increase in other contract services and outside costs was primarily due to expenses related to our dermatology commercial organization and activities to support the launch of OPZELURA for the treatments of atopic dermatitis and vitiligo.

The increase in other contract services and outside costs was primarily due to expenses related to promotional activities to support the launch of OPZELURA for the treatment of vitiligo.

Loss on change in fair value of acquisition-related contingent consideration

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The change in fair value of the acquisition-related contingent consideration for the years ended December 31, 2023 and 2022 was expense of $29.2 million and $12.1 million, respectively, which is recorded in loss on change in fair value of acquisition-related contingent consideration on the consolidated statements of operations.

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.

The loss on change in fair value of the contingent consideration during the years ended December 31, 2023 and 2022 was due primarily to fluctuations in foreign currency exchange rates impacting future revenue projections of ICLUSIG and the passage of time.

(Profit) and loss sharing under collaboration agreements

Under the collaboration and license agreement with MorphoSys, which was executed in March 2020, we and MorphoSys are both responsible for the commercialization efforts of tafasitamab in the United States and will share equally the profits and losses from the co-commercialization efforts.

Under the now terminated collaboration and license agreement with MorphoSys, which was executed in March 2020, we and MorphoSys were both responsible for the commercialization efforts of tafasitamab in the United States and will share equally the profits and losses from the co-commercialization efforts.

For the year ended December 31, 2023 and 2022, our 50% share of the costs for tafasitamab was $2.0 million and $8.0 million, respectively, as recorded in (profit) and loss sharing under collaboration agreements on the consolidated statement of operations.

Other income (expense), net

Other income (expense), net.

Other income (expense), net, for the years ended December 31, 2022 and 2021 was $39.9 million and $10.6 million, respectively.

The increase in other income (expense), net primarily relates to an increase in interest income.

In February 2024, we entered into a purchase agreement with MorphoSys, as a result of which we now hold exclusive global rights for tafasitamab.

See Note 18 of Notes to the Consolidated Financial Statements for further information relating to this agreement.

Interest income and other, net

Interest income and other, net.

Interest income and other, net, for the years ended December 31, 2023 and 2022 was $172.3 million and $39.9 million, respectively.

The increase in interest income and other, net primarily relates to an increase in interest earned on our cash equivalents and marketable securities generally due to higher interest rates.

Unrealized gain (loss) on long term investments.

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Syros 0.4 (2.7)

Total unrealized loss on long term investments $ (87.6) $ (24.1)

Provision (benefit) for income taxes.

The provision (benefit) for income taxes for the years ended December 31, 2022 and 2021 was a provision of $188.5 million and a benefit of $378.1 million, respectively.

The increase in tax expense of $566.6 million from 2021 to 2022 was primarily driven by the change in valuation allowance for U.S.

deferred tax assets.

For the year ended December 31, 2022, we recorded net tax expense of $28.4 million for the increase in the valuation allowance for deferred tax assets, primarily as a result of legislative changes from the Tax Cut and Jobs Act of 2017 that went into effect in 2022 requiring capitalization of research and development expenditures.

For the year ended December 31, 2021, we recorded a benefit from income taxes of $569.0 million when we released the valuation allowance on the majority of our U.S.

deferred tax assets.

Further information on the impacts of the valuation allowance and significant judgments related to changes can be found in Note 13 of Notes to the Consolidated Financial Statements.

Total unrealized gain (loss) on long term investments $ 43.9 $ (87.6)

Provision for income taxes.

The provision for income taxes for the years ended December 31, 2023 and 2022 was $236.6 million and $188.5 million, respectively.

Our effective tax rate of 28.4% for the year ended December 31, 2023 decreased as compared to 35.6% for the prior year period primarily due to the dilution of the rate impact of foreign losses with no associated tax benefit, an increase in the tax rate benefits associated with research and development and orphan drug tax credits and a decrease in certain non-deductible expenses.

Our effective tax rates for 2023 and 2022 were 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.

This was partially offset by tax rate benefits associated with research and development and orphan drug tax credit generations and the foreign derived intangible income deduction.

Liquidity and Capital Resources

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Sources and Uses of Cash.

Due to historical net losses, we had an accumulated deficit of $0.4 billion as of December 31, 2022.

We have funded our research and development operations through cash received from customers, sales of equity securities, the issuance of convertible notes, and collaborative arrangements.

At December 31, 2023, we had available cash, cash equivalents and marketable securities of $3.7 billion.

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Available cash is invested in accordance with our investment policy’s primary objectives of liquidity, safety of principal and diversity of investments.

Cash provided by (used in) operating activities.

The increase in cash provided by operating activities from 2021 to 2022 was due primarily to changes in working capital.

Cash provided by operating activities.

The decrease in cash provided by operating activities from 2022 to 2023 was due primarily to changes in working capital.

Cash used in investing activities.

Our investing activities, other than purchases, sales and maturities of marketable securities, have consisted predominantly of capital expenditures and purchases of long term investments.

During 2023, net cash used in investing activities was $207.7 million, which represents purchases of marketable securities of $456.0 million, payments for intangible assets of $15.0 million, capital expenditures of $32.5 million, and purchases of long term investments of $10.0 million, offset in part by the sale and maturity of marketable securities of $305.8 million.

During 2022, net cash used in investing activities was $78.5 million, which represents purchases of marketable securities of $79.9 million, capital expenditures of $77.8 million, offset in part by the sale and maturity of marketable securities of $79.2 million.

During 2021, net cash used in investing activities was $207.7 million, which represents purchases of marketable securities of $235.2 million, capital expenditures of $181.0 million and purchase of long term equity investments of $33.5 million, offset in part by the sale and maturity of marketable securities of $231.5 million and the sale of long term investment of $10.5 million.

Cash (used in) provided by financing activities.

During 2022, net cash used in financing activities was $0.8 million, and in 2021, net cash provided by financing activities was $6.2 million, respectively, consisting primarily of proceeds from the issuance of common stock under our stock plans net of tax withholdings, offset in part by cash paid to ARIAD/Takeda for contingent consideration.

Cash used in financing activities.

During 2023, net cash used in financing activities was $20.0 million, and in 2022, net cash used in financing activities was $0.8 million, respectively, consisting primarily of cash paid to ARIAD/Takeda for contingent consideration, offset in part by proceeds from the issuance of common stock under our stock plans net of tax withholdings.

Our capital expenditures for construction activities and our non-operating contractual operating and finance lease obligations are discussed in Note 8 of Notes to the Consolidated Financial Statements.

In addition, in October 2019, we entered into an agreement with Wilmington Friends School Inc., to purchase property for $50.0 million to expand our global headquarters.

Under that agreement, closing of the purchase is subject to certain standard closing conditions, including an initial diligence period and a subsequent approval period.

In August 2021, we entered into a $500.0 million, three-year senior unsecured revolving credit facility.

In August 2021, we entered into a $500.0 million, three-year senior unsecured revolving credit facility, which was subsequently amended in May 2023.

We may increase the maximum revolving commitments or add one or more incremental term loan facilities, subject to obtaining commitments from any participating lenders and certain other conditions, in an amount not to exceed $250.0 million plus a contingent additional amount that is dependent on our pro forma consolidated leverage ratio.

As of December 31, 2023, we had no outstanding borrowings and were in compliance with all covenants under this facility.

income tax payments will increase significantly due to the mandatory capitalization and amortization of research and development expenses for tax years beginning after December 31, 2021, as required under the Tax Cuts and Jobs Act of 2017, which eliminated the immediate expensing of such expenses.

The amendment to the credit facility is discussed further in Note 16 of Notes to the Consolidated Financial Statements.

Due to the full utilization of our research and development and orphan drug tax credit carryforwards generated in prior years, our U.S.

tax liabilities continue to reflect the adverse impacts of the mandatory capitalization and amortization of research and development expenses as required under the Tax Cuts and Jobs Act of 2017, which eliminated the immediate expensing of such expenses.

We believe that our cash flow from operations, together with our cash, cash equivalents and marketable securities and funds available under our revolving credit facility, will be adequate to satisfy our capital needs for the foreseeable future.

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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 7. Management’s Discussion and Analysis