What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-04-30 compared with 2023-10-31 · 177 added, 256 removed, 433 unchanged (50% of the section changed)

3 unchanged sentences

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

September 30,

2024 December 31,

1 unchanged sentence

Cash and cash equivalents $ 3,346,204 $ 3,213,376

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)

Marketable securities—available-for-sale (amortized cost $ 506,379 and $ 442,816 as of March 31, 2024 and December 31, 2023, respectively;

allowance for credit losses $ 0 as of March 31, 2024 and December 31, 2023)

504,484 442,667

32 unchanged sentences

400,000,000 shares authorized;

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

224,533,449 and 224,286,862 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 5,070,286 5,016,122

Accumulated other comprehensive income 22,894 15,069

Accumulated deficit ( 40,694 ) ( 437,214 )

Accumulated other comprehensive (loss) income ( 6,172 ) 13,106

Retained earnings 329,933 160,385

Total stockholders’ equity 5,394,271 5,189,837

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Product revenues, net $ 729,923 $ 693,237

2 unchanged sentences

Total revenues 880,889 808,673

Costs and expenses:

Costs, expenses and other:

Cost of product revenues (including definite-lived intangible amortization) 60,956 56,822

2 unchanged sentences

(Gain) loss on change in fair value of acquisition-related contingent consideration ( 456 ) 6,196

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

(Profit) and loss sharing under collaboration agreements ( 1,025 ) ( 1,362 )

Total costs, expenses and other 788,991 783,903

Income from operations 91,898 24,770

1 unchanged sentence

Interest expense ( 430 ) ( 469 )

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

Unrealized gain (loss) on long term investments 99,947 ( 5,318 )

Income before provision for income taxes 236,159 51,856

12 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 169,548 $ 21,703

1 unchanged sentence

Foreign currency translation (loss) gain ( 17,820 ) 3,260

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

Unrealized (loss) gain on marketable securities, net of tax ( 1,746 ) 2,420

Defined benefit pension gain, net of tax 288 193

7 unchanged sentences

Paid-in Capital Accumulated Other

Comprehensive Income Accumulated

Deficit Total

Comprehensive (Loss) Income Retained Earnings Total

Stockholders’

4 unchanged sentences

Stock compensation — 59,781 — — 59,781

Other comprehensive income — — 5,873 — 5,873

Net income — — — 21,703 21,703

Balance at March 31, 2023 $ 223 $ 4,856,914 $ 20,942 $ ( 415,511 ) $ 4,462,568

Issuance of 59,093 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes and 216,168 shares of Common Stock under the ESPP

— 13,704 — — 13,704

Issuance of 1,282 shares of Common Stock for services rendered

Stock compensation — 54,928 — — 54,928

Other comprehensive income — — 5,864 — 5,864

Net income — — — 203,548 203,548

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 — — ( 19,278 ) — ( 19,278 )

Net income — — — 169,548 169,548

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

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(unaudited, in thousands, except number of shares)

Balance at March 31, 2024 $ 224 $ 5,070,286 $ ( 6,172 ) $ 329,933 $ 5,394,271

Stock Additional

Paid-in Capital Accumulated Other

Comprehensive Loss Accumulated

Comprehensive Income Accumulated

Deficit Total

4 unchanged sentences

Issuance of 1,073 shares of Common Stock for services rendered

— 112 — — 112

Stock compensation — 53,558 — — 53,558

Other comprehensive loss — — ( 3,593 ) — ( 3,593 )

Other comprehensive income — — 5,873 — 5,873

Net income — — — 21,703 21,703

Balances at March 31, 2023 $ 223 $ 4,856,914 $ 20,942 $ ( 415,511 ) $ 4,462,568

Issuance of 274,693 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes and 189,684 shares of Common Stock under the ESPP

1 16,600 — — 16,601

Issuance of 1,469 shares of Common Stock for services rendered

— 109 — — 109

Stock compensation — 46,496 — — 46,496

Other comprehensive loss — — ( 2,649 ) — ( 2,649 )

Net income — — — 161,432 161,432

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)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net income $ 169,548 $ 21,703

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

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

Depreciation and amortization 21,947 19,211

3 unchanged sentences

Unrealized (gain) loss on long term investments ( 99,947 ) 5,318

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

(Gain) loss on change in fair value of acquisition-related contingent consideration ( 456 ) 6,196

Changes in operating assets and liabilities:

4 unchanged sentences

Accrued and other liabilities 105,465 71,900

Net cash provided by operating activities 348,758 686,279

Net cash provided by (used in) operating activities 218,811 ( 105,603 )

Cash flows from investing activities:

Purchase of long term investments ( 10,000 ) —

Sale of long term investments — 45

10 unchanged sentences

Net cash (used in) provided by financing activities ( 12,413 ) 4,009

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

Net increase in cash, cash equivalents, restricted cash and investments 275,827 633,063

Cash, cash equivalents, restricted cash and investments at beginning of period 2,953,120 2,059,160

Cash, cash equivalents, restricted cash and investments at end of period $ 3,228,947 $ 2,692,223

Effect of exchange rates on cash, cash equivalents, and restricted cash ( 676 ) ( 199 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 132,610 ( 130,352 )

Cash, cash equivalents, and restricted cash at beginning of period 3,215,221 2,953,120

Cash, cash equivalents, and restricted cash at end of period $ 3,347,831 $ 2,822,768

Supplemental Schedule of Cash Flow Information

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

Organization and Business

Incyte Corporation (including its subsidiaries, “Incyte,” “we,” “us,” or “our”) is a biopharmaceutical company focused on developing and commercializing proprietary therapeutics.

Our portfolio includes compounds in various stages, ranging from preclinical to late stage development, and commercialized products JAKAFI® (ruxolitinib), ICLUSIG® (ponatinib), PEMAZYRE® (pemigatinib), OPZELURA™ (ruxolitinib cream), MINJUVI® (tafasitamab), MONJUVI® (tafasitamab-cxix), which is co-commercialized, and ZYNYZ™ (retifanlimab-dlwr).

Our portfolio includes compounds in various stages, ranging from preclinical to late stage development, and commercialized products JAKAFI® (ruxolitinib), ICLUSIG® (ponatinib), PEMAZYRE® (pemigatinib), OPZELURA® (ruxolitinib cream), MINJUVI® (tafasitamab), MONJUVI® (tafasitamab-cxix), and ZYNYZ® (retifanlimab-dlwr).

Our operations are treated as one operating segment.

2 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 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 as of March 31, 2024, the condensed consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the three months ended March 31, 2024 and 2023, 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, 2023 has been derived from our audited consolidated financial statements.

Although we believe that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year.

6 unchanged sentences

Actual results could differ from those estimates.

Other Intangible Assets, net.

Other intangible assets, net consist of licensed intellectual property rights acquired in business combinations, which are reported at acquisition date fair value, less accumulated amortization, as well as milestone payments made to collaboration partners incurred at or after the product has obtained regulatory approval.

Intangible assets with finite lives are amortized over their estimated useful lives using the straight-line method.

Intangible assets with finite lives are tested for recoverability whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Cost of Product Revenues.

Cost of product revenues includes all product related costs and royalties owed under our collaboration and license agreements, contingent on certain conditions.

In addition, cost of product revenues includes the amortization of our licensed intellectual property for ICLUSIG and the amortization of capitalized milestone payments, using the straight-line method over the respective estimated useful lives, which range between approximately 11 to 14 years.

Cost of product revenues also includes employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial products.

Recent Accounting Pronouncements

There were no new accounting pronouncements issued nor adopted since our filing of the Annual Report on Form 10-K for the year ended December 31, 2022, which could have a significant effect on our condensed consolidated financial statements.

Recent Accounting Pronouncements and Regulatory Updates

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU No.

2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .” This amended guidance applies to all public entities and aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, to enable investors to develop more decision-useful financial analyses.

This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We are currently evaluating the impact that ASU No.

2023-07 will have on our annual consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .” This amended guidance applies to all entities and broadly aims to enhance the transparency and decision usefulness of income tax disclosures.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted for any annual periods for which financial statements have not been issued or made available for issuance.

We are currently evaluating the impact that ASU No.

2023-09 will have on our consolidated financial statements.

In March 2024, the SEC issued Release Nos.

34-99678 “ The Enhancement and Standardization of Climate-Related Disclosures for Investors ” to require public companies to provide certain climate-related information in their registration statements and annual reports.

The compliance dates for the rules amended by this release begin in fiscal year 2025 for large accelerated filers.

On April 4, 2024, the SEC issued an order staying the newly adopted rules.

We are currently evaluating the impact of this release on our financial disclosures.

Revenues are recognized under guidance within ASC 606, Revenue from Contracts with Customers .

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

JAKAFI revenues, net $ 571,839 $ 579,969

2 unchanged sentences

PEMAZYRE revenues, net 17,676 22,475

MINJUVI revenues, net 8,348 5,932 28,063 14,845

MINJUVI/MONJUVI revenues, net 23,874 6,556

ZYNYZ revenues, net 467 —

7 unchanged sentences

Total revenues $ 880,889 $ 808,673

For further information on our revenue-generating contracts, refer to Note 7.

For further information on the MINJUVI/MONJUVI revenues, refer to Note 6, and for further information on our revenue-generating contracts, refer to Note 8.

Fair Value of Financial Instruments

1 unchanged sentence

Losses Estimated

September 30, 2023

March 31, 2024

Debt securities (government) $ 506,379 $ ( 1,895 ) $ 504,484

3 unchanged sentences

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

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.

As of March 31, 2024 and December 31, 2023, 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 September 30, 2023 and December 31, 2022, our Level 2 U.S.

At March 31, 2024 and December 31, 2023, 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 nine months ended September 30, 2023.

We did not experience any transfers of financial instruments between the fair value hierarchy levels during the three months ended March 31, 2024.

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

September 30, 2023

March 31, 2024

Cash and cash equivalents $ 3,346,204 $ — $ — $ 3,346,204

24 unchanged sentences

(Level 3) Balance as of

September 30, 2023

March 31, 2024

Acquisition-related contingent consideration $ — $ — $ 202,000 $ 202,000

10 unchanged sentences

Total liabilities $ — $ — $ 212,000 $ 212,000

The following is a rollforward of our Level 3 liabilities (in thousands):

The following is a roll forward of our Level 3 liabilities (in thousands):

Balance at January 1, $ 212,000

Contingent consideration earned during the period but not yet paid ( 9,544 )

Payments made during the period ( 17,460 )

Change in fair value of contingent consideration ( 456 )

Balance at September 30, $ 207,000

Balance at March 31, $ 202,000

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 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.

The valuation inputs utilized to estimate the fair value of the contingent consideration as of March 31, 2024 and December 31, 2023 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 months ended March 31, 2024 was due primarily to fluctuations in foreign currency exchange rates impacting future revenue projections 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 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.

At March 31, 2024 and December 31, 2023, contingent consideration earned but not yet paid was $ 9.5 million and $ 10.3 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, 21 % and 20 % of the accounts receivable balance as of September 30, 2023 and December 31, 2022, respectively.

The above collaboration partners comprised, in aggregate, 17 % and 20 % of the accounts receivable balance as of March 31, 2024 and December 31, 2023, respectively.

For further information relating to these collaboration and license agreements, refer to Note 8.

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.

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

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:

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

Percentage of Total Net

Product Revenues for the

Three Months Ended Percentage of Total Net

Product Revenues for the

Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Customer A 17 % 17 %

4 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, 33 % and 41 % of the accounts receivable balance as of September 30, 2023 and December 31, 2022, respectively.

Customers A, B, C, D, and E comprised, in aggregate, 41 % and 40 % of the accounts receivable balance as of March 31, 2024 and December 31, 2023, 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 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.

We assessed our collaborative and customer receivable assets as of March 31, 2024 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 March 31, 2024 and December 31, 2023, we had no allowance for doubtful accounts.

Asset Acquisition

On February 5, 2024, we entered into a purchase agreement with MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG (together with MorphoSys AG, “MorphoSys”), under which we gained exclusive global rights to tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab).

We previously had the rights to tafasitamab outside of the United States under our prior collaboration and license agreement with MorphoSys entered into in January 2020, which has now been terminated;

therefore, this new agreement gave us all of the remaining global rights to tafasitamab.

Under the terms of the purchase agreement, we made a payment of $ 25.0 million to MorphoSys and gained global development and commercialization rights for tafasitamab along with MONJUVI inventory.

We will recognize revenue and costs for all U.S.

commercialization and clinical development and MorphoSys will no longer be eligible to receive future milestone, profit split and royalty payments under the now-terminated collaboration and license agreement with MorphoSys.

We evaluated the set of activities and assets acquired under the purchase agreement, and concluded that it did not meet the definition of a business because the acquired set did not include a substantive process.

Therefore, the transaction was accounted for as an asset acquisition and the total purchase price, inclusive of direct transaction costs, was allocated to the acquired MONJUVI inventory, in accordance with applicable accounting guidance.

Under the purchase agreement, we have also become the successor to MorphoSys under its collaboration and license agreement with Xencor, Inc.

(“Xencor”), pursuant to which Xencor granted MorphoSys an exclusive, worldwide license, including the right to sublicense under certain conditions, for tafasitamab.

Xencor is entitled to receive up to $ 186.5 million in future contingent development and regulatory milestones, and up to $ 50.0 million in sales milestones.

Furthermore, Xencor is eligible to receive tiered royalties on global net sales of tafasitamab in the single-digit to sub-teen double-digit percentage range.

Our royalty obligations continue on a country-by-country basis until the later to occur of the expiration of the last valid claim in the licensed patent covering tafasitamab in such country, or 11 years after the first sale thereof following marketing authorization in such country.

The term of the Xencor collaboration agreement will continue until all of our royalty payment obligations have expired, unless terminated earlier.

The Xencor collaboration agreement may be terminated by either party upon written notice to the other party immediately in the event of the other party’s insolvency or upon 120 days’ written notice for the other party’s uncured material breach (or upon 30 days’ written notice in the case of a breach of a payment obligation).

Moreover, we may terminate the Xencor collaboration agreement without cause upon 90 days’ advance written notice to Xencor.

In the event that (i) we terminate this agreement for convenience or (ii) Xencor terminates due to our material breach, our challenge of Xencor’s licensed patents or our insolvency, worldwide rights to develop, manufacture and commercialize licensed products, including tafasitamab, revert back to Xencor.

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

September 30,

2024 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 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.

At March 31, 2024, $ 63.6 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 March 31, 2024, $ 264.3 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 September 30, 2023, inventory with approximately $ 36.7 million of product costs incurred prior to regulatory approval had not yet been sold.

At March 31, 2024, inventory with approximately $ 38.2 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 9 to 12 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

5 unchanged sentences

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

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

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).

In addition, we were initially 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 March 31, 2024, 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.

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 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.

During the three months ended March 31, 2024 and 2023, such royalties on net sales within the United States totaled $ 23.0 million and $ 23.4 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

At March 31, 2024 and December 31, 2023, $ 398.6 million and $ 375.6 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.

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.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three months ended March 31, 2024 and 2023 was $ 89.6 million and $ 76.7 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three months ended March 31, 2024 and 2023 was $ 5.2 million and $ 4.2 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 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.

Since the inception of the agreement through March 31, 2024, 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.

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

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

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

In March 2016, we entered into an amendment to the agreement with Lilly that amended the non-compete provision of the agreement to allow us to engage in the development and commercialization of ruxolitinib in the GVHD field.

Lilly was eligible to receive up to $ 40.0 million in regulatory milestone payments relating to ruxolitinib in the GVHD field.

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

In March 2022, the positive recommendation from the European Medicines Agency for regulatory approval of ruxolitinib in the GVHD field triggered an additional $ 20.0 million milestone payment to Lilly, which was recorded as research and development expense in our condensed consolidated statements of operations for the three months ended March 31, 2022.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three months ended March 31, 2024 and 2023 was $ 30.6 million and $ 34.2 million, respectively.

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

1 unchanged sentence

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

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.

Since the inception of the agreement through March 31, 2024, 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 March 31, 2024, 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 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.

distributed a dividend of shares it owned of its publicly traded subsidiary MiNK Therapeutics' ("MiNK") common stock to shareholders who held Agenus Inc.

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 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.

at March 31, 2024 and December 31, 2023 was $ 7.0 million and $ 10.0 million, respectively.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized loss of $ 3.0 million and $ 10.6 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

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

1 unchanged sentence

The collaboration encompasses up to ten independent programs.

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.

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.

Since the inception of the agreement through March 31, 2024, we have paid and expensed Merus milestones totaling $ 10.0 million.

As of March 31, 2024, we held an investment of approximately 4.0 million common shares.

The fair market value of our total long term investment in Merus at March 31, 2024 and December 31, 2023 was $ 180.3 million and $ 110.1 million, respectively.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized gain of $ 70.2 million and $ 10.4 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.

4 unchanged sentences

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

In July 2022, we amended our agreement with MacroGenics to reflect changes related to the payment of certain milestones and paid MacroGenics $ 30.0 million, which was previously recorded as research and development expense in our condensed consolidated statements of operations in the third quarter of 2022.

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 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.

This milestone payment was capitalized as an intangible asset and included in Other intangible assets, net on the condensed consolidated balance sheet as of March 31, 2024, and is being amortized through cost of product revenues over the estimated useful life of 13.5 years.

Since the inception of the agreement, inclusive of the July 2022 amendment to the agreement, through March 31, 2024, 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 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 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.

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

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

MorphoSys is responsible for leading the commercialization strategy and booking all revenue from sales of tafasitamab in the United States, and we and MorphoSys are both responsible for commercialization efforts in the United States and will share equally the profits and losses from the co-commercialization efforts.

We will lead the commercialization strategy outside of the United States, and will be responsible for commercialization efforts and book all revenue from sales of tafasitamab outside of the United States, subject to our royalty payment obligations set forth below.

We and MorphoSys have agreed to co-develop tafasitamab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55 % of such costs and MorphoSys responsible for 45 % of such costs.

Each company is responsible for funding any independent development activities, and we are responsible for funding development activities specific to territories outside of the United States.

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

MorphoSys is eligible to receive up to $ 737.5 million in future contingent development and regulatory milestones and up to $ 315.0 million in commercialization milestones as well as tiered royalties ranging from the mid-teens to mid-twenties of net sales outside of the United States.

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 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.

Research and development expenses for the three months ended March 31, 2024 and 2023 also included $ 12.1 million and $ 17.8 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

At March 31, 2024 and December 31, 2023, a total of $ 0.4 million and $ 0.3 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

As described in Note 6, on February 5, 2024, we entered into a purchase agreement with MorphoSys that became effective as of that date, as a result of which we now hold exclusive global rights for tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab).

Prior to the acquisition, pursuant to a now-terminated collaboration and license agreement, we and MorphoSys agreed to co-develop tafasitamab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55 % of such costs and MorphoSys responsible for 45 % of such costs.

Each company was responsible for funding any independent development activities, and we were responsible for funding development activities specific to territories outside of the United States.

As of March 31, 2024, 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 March 31, 2024 and December 31, 2023 was $ 65.8 million and $ 35.9 million, respectively.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized gain of $ 29.9 million and $ 1.4 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 period from January 1, 2024 to the asset acquisition on February 5, 2024, was a profit of $ 1.0 million, and is recorded as (Profit) and loss sharing under collaboration agreements on the condensed consolidated statement of operations.

As described in Note 6, subsequent to the asset acquisition, we will recognize revenue and costs for all commercialization and clinical development of tafasitamab in the United States.

Our 50 % share of the United States profit or loss for the commercialization of tafasitamab for the three months ended March 31, 2023 was a profit of $ 1.4 million, and is recorded as (Profit) and loss sharing under collaboration agreements on the condensed consolidated statement of operations.

Research and development expenses for the period from January 1, 2024 to the asset acquisition on February 5, 2024, includes $ 10.7 million, related to our 55 % share of the co-development costs for tafasitamab.

Research and development expenses for the three months ended March 31, 2023, includes $ 25.2 million, related to our 55 % share of the co-development costs for tafasitamab.

At March 31, 2024 and December 31, 2023, $ 3.5 million and $ 18.8 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the former 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”).

The agreement became effective in December 2021.

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.

Sales of axatilimab outside the United States will be subject to our royalty payment obligations to Syndax, as set forth below.

We and Syndax have agreed to co-develop axatilimab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55 % of such costs and Syndax responsible for 45 % of such costs.

Each company is responsible for funding any independent development activities.

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

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

Inclusive of an upfront, non-refundable payment, since the inception of the agreement through March 31, 2024, we have made payments of $ 117.0 million to Syndax, which were previously recorded in research and development expense.

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’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.

As of March 31, 2024, 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 March 31, 2024 and December 31, 2023 was $ 33.8 million and $ 30.7 million.

For the three months ended March 31, 2024 and 2023, we recorded an unrealized gain of $ 3.1 million and an unrealized loss of $ 6.2 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 months ended March 31, 2024, includes $ 7.1 million related to our 55 % share of the co-development costs for axatilimab.

At March 31, 2024 and December 31, 2023, $ 1.9 million and $ 1.8 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheet for amounts due to Syndax under the agreement.

China Medical Systems Holdings Limited

In March 2024, we entered into a Collaboration and License Agreement with China Medical System Skinhealth, a wholly-owned dermatology medical aesthetic company and subsidiary of China Medical System Holdings Limited (“CMSHL”), for the development and commercialization of povorcitinib, a selective oral JAK1 inhibitor, in certain indications in certain Asian territories.

In March 2024, we recognized an upfront payment under this agreement of $ 25.0 million upon our transfer of the functional intellectual property related to povorcitinib to CMSHL which was recorded in milestone and contract revenues on the condensed consolidated statement of operations for the three months ended March 31, 2024.

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

CMSHL received an exclusive license to develop and commercialize and a non-exclusive license to manufacture povorcitinib in autoimmune and inflammatory dermatologic diseases, including non-segmental vitiligo, hidradenitis suppurativa, prurigo nodularis, asthma and chronic spontaneous urticaria, for patients in mainland China, Hong Kong, Macau, Taiwan and certain countries in Southeast Asia.

Other Agreements

5 unchanged sentences

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

September 30,

2024 December 31,

11 unchanged sentences

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

September 30,

2024 December 31,

3 unchanged sentences

Sales and marketing 41,971 37,369

Construction in progress 11 3,493

Accrued Taxes 126,762 42,295

Operating lease liabilities 4,783 5,686

2 unchanged sentences

Stock Compensation

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.

2010 Stock Incentive Plan.

In May 2010 the Board of Directors adopted the 2010 Stock Incentive Plan (the “2010 Stock Plan”), which was most recently amended in April 2023, for issuance of common stock to employees, non-employee directors, consultants, and scientific advisors.

Awards under the 2010 Stock Plan include stock options, RSUs and PSUs.

2024 Inducement Stock Incentive Plan.

In January 2024, our Board of Directors adopted the Incyte Corporation 2024 Inducement Stock Incentive Plan (the “2024 Inducement Plan”).

In reliance on Nasdaq Marketplace Rule 5635(c)(4), stockholder approval was not obtained.

A total of 1,000,000 shares of common stock are reserved for issuance pursuant to the 2024 Inducement Plan.

We recorded $ 59.8 million and $ 53.4 million of stock compensation expense on our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $ 36.8 million and $ 31.0 million for the three months ended March 31, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $ 22.4 million and $ 21.6 million for the three months ended March 31, 2024 and 2023, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $ 0.6 million and $ 0.8 million, respectively, for the three months ended March 31, 2024 and 2023.

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

September 30, September 30,

For the Three Months Ended For the Three Months Ended

March 31, March 31,

2024 2023 2024 2023

9 unchanged sentences

Nonemployee awards are measured on the grant date by estimating the fair value of the equity instruments to be issued using the expected term, similar to our employee awards.

Option activity under our 2010 Stock Incentive Plan (the “2010 Stock Plan”) was as follows:

Option activity under our 2010 Stock Plan and 2024 Inducement Plan was as follows:

Shares Subject to

6 unchanged sentences

Options cancelled ( 131,662 ) $ 86.44

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

Balance at March 31, 2024 12,914,325 $ 84.29

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.

Restricted stock unit (“RSU”) and performance share (“PSU”) award activity under the 2010 Stock Plan was as follows:

Restricted stock unit (“RSU”) and performance share (“PSU”) award activity under the 2010 Stock Plan and 2024 Inducement Plan was as follows:

Shares Subject to

3 unchanged sentences

RSUs granted 330,699 $ 61.16

PSUs granted 300,512 $ 61.76

Additional PSUs earned 21,866 $ 83.58

RSUs released ( 339,217 ) $ 80.82

PSUs released ( 108,712 ) $ 102.44

RSUs cancelled ( 42,871 ) $ 70.83

PSUs cancelled ( 52,392 ) $ 72.47

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

Balance at March 31, 2024 7,135,819 $ 71.29

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

6 unchanged sentences

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 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.

For the three months ended March 31, 2024 and 2023 we recorded $ 3.4 million and $ 6.5 million, respectively, 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 and 2024 Inducement Plan.

Each RSU and PSU grant reduces the available share pool by 2 shares.

1 unchanged sentence

Balance at December 31, 2023 10,815,026

Additional authorization 12,500,000

Additional authorization - 2024 Inducement Plan 1,000,000

Options, RSUs and PSUs granted ( 1,279,593 )

Options, RSUs and PSUs cancelled 217,404

Balance at September 30, 2023 10,272,447

Balance at March 31, 2024 10,752,837

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 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):

Total compensation cost of options granted but not yet vested, as of March 31, 2024, was $ 30.6 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 March 31, 2024, was $ 204.3 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 March 31, 2024, was $ 13.3 million, which is expected to be recognized over the weighted average period of 1.2 years, should the underlying performance conditions be deemed probable of achievement.

For the three months ended March 31, 2024 and 2023, 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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Income before provision for income taxes $ 236,159 $ 51,856

1 unchanged sentence

Effective tax rate 28.2 % 58.1 %

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

Our effective tax rate for the three months ended March 31, 2024 and 2023 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 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.

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 the foreign derived intangible income deductions.

The effective tax rate for the three months ended March 31, 2024 decreased as compared to the prior year period primarily due to the decrease in foreign losses with no associated tax benefit, and to a lesser extent, the tax effects of unrealized gains on long term investments.

The balance of our unrecognized tax benefits (including penalties and interest) increased by $ 4.2 million during the three months ended March 31, 2024.

This movement was primarily driven by increases related to prior period tax positions of $ 3.1 million and $ 1.4 million of interest and penalties.

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

In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law.

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

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

The Organization for Economic Cooperation and Development Pillar 2 guidelines, which were supported by over 130 countries worldwide, are designed to impose a 15% global minimum tax on adjusted financial results.

Certain aspects of Pillar 2 took effect on January 1, 2024, while other aspects go into effect on January 1, 2025.

We are evaluating the potential impact of Pillar 2 on our business, as many of the countries in which we operate are enacting legislation implementing Pillar 2.

Although many aspects of Pillar 2 remain to be clarified, at this time there are no material impacts on our effective tax rate .

Net Income Per Share

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Basic net income $ 169,548 $ 21,703

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Outstanding stock options and awards 13,165,842 10,078,342

4 unchanged sentences

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 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 contribution expense for the three months ended March 31, 2024 and 2023 was $ 5.4 million and $ 5.6 million, respectively.

Defined Benefit Pension Plans

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Service cost $ 2,621 $ 2,088

14 unchanged sentences

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 %.

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 March 31, 2024, we have accrued approximately $ 73.7 million within accrued and other current liabilities on the condensed 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 March 31, 2024 is approximately 7.2 %.

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.

In addition, as described in Note 8, we have an outstanding contractual dispute with Novartis relating to royalties on JAKAFI net sales within the United States.

Subsequent Event

In April 2024, Incyte and a wholly-owned subsidiary of Incyte (“Merger Sub”) entered into an agreement and plan of merger (the “Merger Agreement”) with Escient Pharmaceuticals, Inc.

(“Escient”), pursuant to which Merger Sub will merge with and into Escient and Escient will become a wholly-owned subsidiary of Incyt e.

Escient is a clinical-stage drug development company advancing novel small molecule therapeutics for systemic immune and neuro-immune disorders.

Upon the terms and subject to the conditions set forth in the Merger Agreement, we will acquire Escient for consideration of $ 750.0 million plus Escient’s net cash remaining at the close of the transaction, subject to adjustments set forth in the Merger Agreement .

The acquisition is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, among other customary conditions, and will become effective promptly following the satisfaction or waiver of these conditions.

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