What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-04-29 · 121 added, 78 removed, 735 unchanged (21% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations as of and for the three months ended March 31, 2025 should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2024 previously filed with the SEC.

The following discussion of our financial condition and results of operations as of and for the three and six months ended June 30, 2025 should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2024 previously filed with the SEC.

Forward-Looking Statements

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• fluctuations in net cash provided and used by operating, financing and investing activities;

• our ability to analyze the effects of new accounting pronouncements and apply new accounting rules;

• changes in tax laws and regulations and our ability to analyze the effects of new accounting pronouncements and apply new accounting rules;

• risks relating to our ability to sustain profitability;

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Warnings and precautions for MINJUVI include infusion-related reactions, myelosuppression, including neutropenia and thrombocytopenia, infections and tumour lysis syndrome.

In December 2024, we submitted a supplemental Biologics License Application (sBLA) for tafasitamab in relapsed or refractory follicular lymphoma (FL) to the FDA.

In June 2025, MONJUVI (tafasitamab-cxix) was approved by the FDA for the treatment of adult patients with relapsed or refractory follicular lymphoma (FL) in combination with rituximab and lenalidomide.

The FDA approval was based on data from the pivotal Phase 3 inMIND trial.

PEMAZYRE (pemigatinib)

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In September 2024, we announced positive results from the Phase 3 POD1UM-303/InterAACT2 trial of ZYNYZ (retifanlimab) in combination with platinum-based chemotherapy (carboplatin–paclitaxel) for the treatment of adults with inoperable locally recurrent or metastatic SCAC.

In December 2024, the sBLA submission for retifanlimab in advanced/metastatic SCAC was filed with the FDA with approval anticipated in the second half of 2025.

In May 2025, ZYNYZ (retifanlimab-dlwr) was approved by the FDA for the treatment of adult patients with advanced SCAC in combination with chemotherapy and as a single agent.

The FDA approval was based on data from two trials:

the Phase 3 POD1UM-303/InterAACT2 and the Phase 2 POD1UM-202 trial.

We have submitted a Type II variation Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) and a Japanese New Drug Application (J-NDA) for retifanlimab in advanced SCAC.

NIKTIMVO (axatilimab-csfr)

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Bioavailability and bioequivalence data were published for ruxolitinib’s once-daily (QD) extended release (XR) formulation at the European Hematology Association (EHA) Virtual Congress in June 2021.

In March 2023, the FDA issued a complete response letter for ruxolitinib extended-release (XR) tablets for once-daily (QD) use in the treatment of certain types of MF, PV and GVHD.

In December 2023, we received FDA feedback and agreed on the requirements to address the complete response letter.

In March 2023, the FDA issued a complete response letter (CRL) for ruxolitinib extended-release (XR) tablets for once-daily (QD) use in the treatment of certain types of MF, PV and GVHD.

In December 2023, we received FDA feedback and agreed on the requirements to address the CRL.

In early 2025, we announced that a bioequivalence study of ruxolitinib XR was completed and met the bioequivalence criteria set by the FDA.

These data are anticipated to be submitted to the FDA, in response to the CRL, by year-end 2025.

Phase 2 trials combining ruxolitinib with investigational agents from our portfolio such as INCB57643 (BET) in patients with MF are ongoing with data presented demonstrating early signals of clinical activity in monotherapy and in combination with ruxolitinib.

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In July 2023, a Phase 1 study evaluating INCA033989 was initiated.

In June 2025, data from the Phase 1 study evaluating INCA033989 in mutCALR positive patients with essential thrombocythemia were presented during a late-breaking session at the 2025 European Hematology Association (EHA) Congress in Milan, Italy.

The data showed rapid and durable normalization of platelet counts across all dose levels and importantly, a reduction in peripheral blood mutCALR variant allele frequency (VAF) correlating with hematologic response.

INCA033989 was well tolerated with a favorable safety profile with no dose limiting toxicities reported.

Together, the data demonstrates the potential for INCA033989 to modify disease by directly inhibiting and eliminating oncogenic mutCALR cells, while sparing healthy cells and restoring normal blood cell production.

The Phase 1 data in patients with MF as monotherapy and in combination with ruxolitinib are anticipated in the second half of 2025.

INCB160058 (JAK2V617Fi)

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(mutCALR) Myelofibrosis, essential thrombocythemia:

(JAK2V617Fi) Myelofibrosis:

(JAK2V617Fi) Myeloproliferative Neoplasms (MPNs):

Tafasitamab (MONJUVI/MINJUVI)

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Phase 3 ( front MIND)

Relapsed or refractory follicular lymphoma (FL):

Phase 3 ( in MIND)

Retifanlimab (ZYNYZ) 2

Squamous cell anal cancer (SCAC):

Phase 3 (POD1UM-303)

Non-small cell lung cancer (NSCLC):

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These results showed that patients who initially experienced limited or no facial or total body repigmentation at six months achieved improved repigmentation after continued treatment with OPZELURA for up to two years.

In October 2024, OPZELURA cream 1.5% was granted a Notice of Compliance by Health Canada for the topical treatment of both mild to moderate atopic dermatitis and nonsegmental vitiligo in patients 12 years of age and older.

In October 2024, OPZELURA cream 1.5% was granted a Notice of Compliance by Health Canada for the topical treatment of both mild to moderate AD and nonsegmental vitiligo in patients 12 years of age and older.

Clinical Programs in Dermatology

Ruxolitinib cream

Ruxolitinib cream is a potent, selective inhibitor of JAK1 and JAK2 that provides the opportunity to directly target diverse pathogenic pathways that underlie certain dermatologic conditions, including AD, vitiligo, lichen planus, lichen sclerosus, hidradenitis suppurativa (HS) and prurigo nodularis (PN).

In November 2022, we initiated two Phase 2 trials evaluating ruxolitinib cream in lichen planus and lichen sclerosus.

Lichen planus is a recurrent inflammatory condition affecting the skin and mucosal surfaces and can result in itchy, purple bumps on the skin.

Two Phase 3 trials evaluating ruxolitinib cream in prurigo nodularis were initiated in 2023.

We continue to expand the development of ruxolitinib cream into new indications as part of our efforts to maximize the potential opportunity with ruxolitinib cream.

Ruxolitinib cream is a potent, selective inhibitor of JAK1 and JAK2 that provides the opportunity to directly target diverse pathogenic pathways that underlie certain dermatologic conditions, including pediatric AD, vitiligo, hidradenitis suppurativa (HS) and prurigo nodularis (PN).

Atopic Dermatitis.

In July 2023, we announced that the Phase 3 trial (TRuE-AD3) evaluating ruxolitinib cream in pediatric AD patients (age > 2 and <12) had met its primary endpoint.

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Again, significantly more patients treated with ruxolitinib cream (0.75% and 1.5%) achieved Investigator’s Global Assessment Treatment Success (IGA-TS) than patients treated with vehicle control (non-medicated cream).

In October 2024, the supplemental New Drug Application (sNDA) submission for ruxolitinib cream in pediatric atopic dermatitis was filed with the FDA with approval anticipated in the second half of 2025.

In June 2025, the FDA extended the review period for the sNDA for ruxolitinib cream for the treatment of children 2-11 years old with mild to moderate AD.

The Prescription Drug User Fee Act (PDUFA) action date was extended by three months to September 19, 2025.

In July 2025, we announced positive topline results from the Phase 3 (TRuE-AD4) study evaluating ruxolitinib cream in adult patients with moderate atopic dermatitis.

The study met the co-primary endpoints at Week 8, with a statistically significant proportion of patients achieving both Investigator's Global Assessment Treatment Success (IGA-TS) and EASI75, which is defined as a 75% or greater improvement in the Eczema Area Severity Index score from baseline.

In addition, the study met all key secondary endpoints.

Ruxolitinib cream was well tolerated with no new safety signals.

The full dataset will be presented at an upcoming medical conference.

Hidradenitis Suppurativa.

In January 2024, we announced positive topline results from a randomized controlled Phase 2 study evaluating ruxolitinib cream in HS.

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Ruxolitinib cream was well tolerated and consistent with its known safety profile.

A Phase 3 study is expected to initiate in 2025.

In October 2024, we disclosed results from the Phase 2 study of ruxolitinib cream in patients with cutaneous lichen planus.

At this time, we do not plan to advance ruxolitinib cream into a registrational study for lichen planus and plan to publish the results of this study in the future.

Additionally, the Phase 2 study evaluating ruxolitinib cream for lichen sclerosus did not meet our internal bar for success and at this time, we are not planning to advance this indication into a registrational study.

In October 2024, we announced the Phase 3 trial for ruxolitinib cream in mild to moderate HS is on track to initiate in the first half of 2025 following achieving alignment on the study design with the FDA.

In March 2025, results from two Phase 3 studies (TRuE-PN1 and TRuE-PN2) evaluating ruxolitinib cream in patients with prurigo nodularis were presented in a late-breaking oral session at the American Academy of Dermatology annual meeting.

In June 2025, two Phase 3 studies (TRuE-HS2 and TRuE-HS2) evaluating ruxolitinib cream in mild to moderate HS were initiated.

Prurigo Nodularis.

In March 2025, results from two Phase 3 studies (TRuE-PN1 and TRuE-PN2) evaluating ruxolitinib cream in patients with PN were presented in a late-breaking oral session at the American Academy of Dermatology annual meeting.

The TRuE-PN1 study met the primary endpoint of a > 4-point improvement from baseline in Worst-Itch Numeric Rating Scale (WI-NRS4) at Week 12 and all key secondary endpoints.

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Escient’s clinical development portfolio includes INCB000262 , a potent, highly selective, once-daily small molecule antagonist of Mas-related G protein-coupled receptor (MRGPRX2) and INCB000547 , an oral MRGPRX4 antagonist.

In November 2024, we announced that enrollment was paused in the ongoing Phase 2 study of MRGPRX2 (INCB000262) in CSU.

The decision was made following the observation of certain in vivo preclinical toxicology findings.

These data have been shared with the FDA and at this time, we have no intention to enroll additional patients.

Enrollment in the other INCB000262 proof-of-concept studies in chronic inducible urticaria and AD is complete.

In November 2024, we announced that enrollment was paused in the ongoing Phase 2 study of MRGPRX2 (INCB000262) in CSU following the observation of certain in vivo preclinical toxicology findings.

Subsequently, we made the decision to not pursue further development.

In November 2024, we announced that data from the Phase 2 study evaluating MRGPRX4 (INCB000547) in cholestatic pruritus did not support further development.

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Phase 3 pediatric study (TRuE-AD3);

sNDA under review in the U.S.

Hidradenitis suppurativa:

Phase 3 expected to initiate in 2025

Phase 3 (TRuE-HS1, TRuE-HS2)

Prurigo nodularis:

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In January 2020, we and Lilly announced that baricitinib met the primary endpoint in both BREEZE-AD4 and BREEZE-AD5, the results of which completed the placebo-controlled data program intended to support global registrations.

A supplemental New Drug Application (sNDA) for baricitinib was submitted by Lilly for the treatment of patients with moderate to severe AD.

A sNDA for baricitinib was submitted by Lilly for the treatment of patients with moderate to severe AD.

In April 2021, we and Lilly announced the FDA extended the review period for the sNDA for baricitinib for the treatment of moderate to severe AD by three months to allow time for additional data analyses.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.

There have been no significant changes to our critical accounting policies or estimates during the three months ended March 31, 2025.

There have been no significant changes to our critical accounting policies or estimates during the six months ended June 30, 2025.

Recent Accounting Pronouncements and Regulatory Updates

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Results of Operations

We recorded net income of $158.2 million and basic net income per share of $0.82 and diluted net income per share of $0.80 for the three months ended March 31, 2025, as compared to net income of $169.5 million and basic net income per share of $0.76 and diluted net income per share of $0.75 in the corresponding period in 2024.

We recorded net income of $405.0 million and basic net income per share of $2.09 and diluted net income per share of $2.04 for the three months ended June 30, 2025, as compared to net loss of $444.6 million and basic and diluted net loss per share of $2.04 in the corresponding period in 2024.

We recorded net income of $563.2 million and basic net income per share of $2.91 and diluted net income per share of $2.84 for the six months ended June 30, 2025, as compared to net loss of $275.1 million and basic and diluted net loss per share of $1.24 in the corresponding period in 2024.

Three Months Ended

(in millions)

June 30, Six Months Ended

2025 2024 2025 2024

(in millions) (in millions)

JAKAFI revenues, net $ 763.8 $ 706.0 $ 1,473.2 $ 1,277.8

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Total revenues $ 1,215.5 $ 1,043.8 $ 2,268.4 $ 1,924.6

The increase in JAKAFI product revenues for the three months ended March 31, 2025 as compared to the corresponding period in 2024 was comprised of a volume increase of $98.7 million and a price increase of $38.9 million.

The increase was primarily driven by an increase in paid demand of 10% reflecting continued demand growth in all indications, the positive impact of the Part D redesign under the Inflation Reduction Act, and 7% favorable impact from less de-stocking compared to the first quarter of 2024.

JAKAFI inventory levels were within normal range at the end of the first quarter of 2025.

The increase in OPZELURA net product revenues for the three months ended March 31, 2025 as compared to the corresponding period in 2024 was primarily due to continued growth in new patient starts and refills in the U.S.

prescription paid demand up 24% compared to the first quarter of 2024.

Additionally, $23.5 million of net product revenues during the first quarter of 2025 were from outside of the U.S., driven by continued uptake in Germany and France, as well as growth from the recent launches in Italy and Spain.

The increases were partially offset by a reduction in channel inventory.

OPZELURA inventory levels were within normal range at the end of the first quarter of 2025.

The increase in MINJUVI/MONJUVI net product revenues for the three months ended March 31, 2025 was as a result of the first quarter of 2025 reflecting three months of net product revenues in the U.S., compared to two months of net product revenue in the first quarter of 2024 due to the acquisition of U.S.

rights to MONJUVI, which closed in February 2024.

Refer to Note 6 of Notes to the Condensed Consolidated Financial Statements for further information related to the acquisition.

NIKTIMVO net product revenues for the three months ended March 31, 2025 was driven by the commercial launch of the product during the first quarter of 2025.

The increase in JAKAFI for the three and six months ended June 30, 2025 as compared to the corresponding periods in 2024 was primarily driven by an increase in paid demand reflecting continued demand growth in all indications.

JAKAFI inventory levels were within normal range at the end of the second quarter of 2025.

The increase in OPZELURA net product revenues for the three and six months ended June 30, 2025 as compared to the corresponding periods in 2024 was primarily due to increased patient demand and refills in the U.S.

in both atopic dermatitis and vitiligo.

Additionally, $32.3 million of net product revenues during the second quarter of 2025 were from outside of the U.S., driven by continued uptake in France, as well as growth from the recent launches in Italy and Spain.

OPZELURA inventory levels were within normal range at the end of the second quarter of 2025.

NIKTIMVO net product revenues for the three and six months ended June 30, 2025 reflects continued strong uptake of the product following its commercial launch during the first quarter of 2025.

The increase in ZYNYZ net product revenue for the three and six months ended June 30, 2025 was primarily driven by the approval of the product in squamous cell anal carcinoma in the second quarter of 2025.

The increase in total royalty revenues for the three and six months ended June 30, 2025 as compared to the corresponding periods in 2024 was primarily driven by growth in JAKAVI royalty revenue.

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

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The following table provides a summary of activity with respect to our sales allowances and accruals (in thousands):

Three Months Ended March 31, 2025 Discounts and

Six Months Ended June 30, 2025 Discounts and

Fees Commercial & Government

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Credits/payments for prior period sales (21,144) (134,723) (8,081) (4,149) (168,097)

Balance at March 31, 2025 $ 29,381 $ 406,877 $ 12,540 $ 25,785 $ 474,583

Balance at June 30, 2025 $ 29,207 $ 480,767 $ 12,559 $ 26,531 $ 549,064

government rebates and chargebacks are the most significant component of our sales allowances.

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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, 2025, we have accrued approximately $145.4 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, 2025 is approximately 7.3%.

As of June 30, 2025, we have accrued approximately $165.2 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 June 30, 2025 is approximately 6.6%.

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

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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.

Our milestone and contract revenues for the three months ended March 31, 2024, was derived from a $25.0 million upfront payment received during the first quarter of 2024 upon our transfer of functional intellectual property to CMSHL.

Our milestone and contract revenues for the three and six months ended June 30, 2025, was derived from a $5.0 million development milestone upon approval of tafasitamab in treating follicular lymphoma.

Our milestone and contract revenues for the six months ended June 30, 2024, was derived from a $25.0 million upfront payment received during the first quarter of 2024 upon our transfer of functional intellectual property to CMSHL.

Cost of Product Revenues

Three Months Ended

(in millions)

June 30, Six Months Ended

2025 2024 2025 2024

(in millions) (in millions)

Product costs $ 30.7 $ 31.2 $ 58.1 $ 58.6

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Royalty expense 25.9 36.9 59.6 62.0

Profit share 10.3 — 10.3 —

Amortization of definite-lived intangible assets 6.0 5.7 12.0 11.4

Total cost of product revenues $ 78.8 $ 76.6 $ 152.0 $ 137.6

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 under our collaborative agreements and amortization of our licensed intellectual property rights for ICLUSIG and the amortization of capitalized milestone payments.

The increase in cost of product revenues for the three months ended March 31, 2025 as compared to the same periods in 2024 was primarily due to increased royalty expense.

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 and profit sharing under our collaborative agreements and amortization of our licensed intellectual property rights for ICLUSIG and capitalized milestone payments .

The increase in cost of product revenues for the three and six months ended June 30, 2025 as compared to the same periods in 2024 was driven by growth in net product revenues, the NIKTIMVO profit share and increased manufacturing related costs, partially offset by the impact of the contract dispute settlement with Novartis.

Contract Dispute Settlement

As described further in Note 8 of Notes to the Condensed Consolidated Financial Statements, during May 2025, we and Novartis entered into a settlement agreement with respect to litigation initiated by Novartis relating to the duration of royalty payments owed by us to Novartis under the our Collaboration and License Agreement.

As of March 31, 2025, we had approximately $537.1 million of accrued royalties relating to the dispute with Novartis included in accrued and other current liabilities on our condensed consolidated balance sheet.

Under the settlement agreement, we paid Novartis $280.0 million as the settlement of disputed royalties on net sales of JAKAFI in the United States through December 31, 2024, and agreed to reduce by 50% the royalty rate payable by us on future net sales of JAKAFI in the United States beginning January 1, 2025.

The reduced royalty paid for the quarter ending March 31, 2025, was approximately $14.9 million.

The difference of $242.2 million between the total accrued royalties and the total amount paid by us to Novartis as disclosed above was recorded in contract dispute settlement on our condensed consolidated statement of operations for the three and six months ended June 30, 2025.

Operating Expenses

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Three Months Ended

(in millions)

June 30, Six Months Ended

2025 2024 2025 2024

(in millions) (in millions)

Salary and benefits related $ 131.5 $ 120.5 $ 264.0 $ 243.2

Stock compensation 37.7 34.5 74.4 71.3

Escient acquisition related compensation expense — 11.3 — 11.3

Escient IPR&D expense — 679.4 — 679.4

Clinical research and outside services 286.4 247.7 515.8 474.3

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We account for research and development costs by natural expense line and not costs by project.

The increase in salary and benefits related expense for the three months ended March 31, 2025 as compared to the corresponding period in 2024 was due primarily to increased headcount to sustain our development pipeline.

The increase in salary and benefits related expense for the three and six months ended June 30, 2025 as compared to the corresponding period in 2024 was due primarily to increased headcount to sustain our development pipeline.

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 for the three months ended March 31, 2025 as compared to the corresponding period in 2024, was primarily due to continued investment in our late stage development assets and timing of certain expenses.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $15.5 million and $1.0 million, respectively, for the three months ended March 31, 2025 and 2024.

Research and development expenses for the three months ended March 31, 2025 and 2024 were net of approximately $2.6 million and $17.1 million, respectively, of costs reimbursed by our collaborative partners.

Additionally, as described in Note 6 to the Condensed Consolidated Financial Statements, as part of the Escient acquisition, during the three and six months ended June 30, 2024, we recognized compensation expense in research and development of $11.3 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition on our condensed consolidated statements of operations.

Research and development expenses for the three and six months ended June 30, 2024 also include the $679.4 million of expense related to the acquired in-process research and development assets as part of the Escient acquisition, as described in Note 6 to the Condensed Consolidated Financial Statements.

The increase in clinical research and outside services expense for the three months ended June 30, 2025 as compared to the corresponding period in 2024, 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 of $12.6 million and $28.1 million, respectively, for the three and six months ended June 30, 2025.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $0.4 million and $1.4 million, respectively, for the three and six months ended June 30, 2024.

Research and development expenses for the three and six months ended June 30, 2025 and 2024 were net of $3.9 million, $6.5 million, $4.2 million and $21.3 million, respectively, of costs reimbursed by our collaborative partners.

In addition to one-time expenses resulting from upfront fees in connection with the entry into any new or amended collaboration agreements and payment of milestones under those agreements, research and development expenses may fluctuate from period to period depending upon the stage of certain projects and the level of preclinical and clinical trial related activities.

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Three Months Ended

(in millions)

June 30, Six Months Ended

2025 2024 2025 2024

(in millions) (in millions)

Salary and benefits related $ 94.2 $ 83.4 $ 192.0 $ 166.6

Stock compensation 26.1 21.7 49.5 44.1

Escient acquisition related compensation expense — 20.2 — 20.2

Other contract services and outside costs 210.7 180.7 415.2 375.3

Total selling, general and administrative expenses $ 331.0 $ 306.0 $ 656.7 $ 606.2

The increase in salary and benefits related expense for the three months ended March 31, 2025 as compared to the corresponding period in 2024 was due primarily to increased headcount.

The increase in salary and benefits related expense for the three and six months ended June 30, 2025 as compared to the corresponding period in 2024 was due primarily to increased headcount.

The increase in other contract services and outside costs for the three months ended March 31, 2025, as compared to the corresponding period in 2024, was primarily due to the timing of consumer marketing activities and of certain other expenses.

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

Additionally, as described in Note 6 to the Condensed Consolidated Financial Statements, as part of the Escient acquisition, during the three months ended June 30, 2024, we recognized compensation expense in selling, general and administrative expenses of $20.2 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition on our condensed consolidated statements of operations.

The increase in other contract services and outside costs for the three months ended June 30, 2025, as compared to the corresponding period in 2024, was primarily due to increased legal costs relating to the Novartis contract dispute settlement and other matters and timing of consumer marketing activities.

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

Acquisition-related contingent consideration, which consists of our future royalty obligations to ARIAD/Takeda, was recorded on the acquisition date, June 1, 2016, at the estimated fair value of the obligation, in accordance with the acquisition method of accounting.

The change in fair value of the acquisition-related contingent consideration for the three months ended March 31, 2025 and 2024 was a loss of $11.6 million and gain of $0.5 million, respectively, which is recorded in loss (gain) on change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value of the contingent consideration during the three months ended March 31, 2025 and 2024 was due primarily to fluctuations in foreign currency exchange rates impacting future revenue projections of ICLUSIG and the passage of time.

The change in fair value of the acquisition-related contingent consideration for the three and six months ended June 30, 2025 was a loss of $22.8 million and $34.3 million, respectively, which is recorded in loss on change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value of the acquisition-related contingent consideration for the three and six months ended June 30, 2024 was a loss of $0.9 million and loss of $0.4 million, respectively, which is recorded in loss on change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value of the contingent consideration during the three and six months ended June 30, 2025 and 2024 was primarily due to fluctuations in foreign currency exchange rates impacting future revenue projections of ICLUSIG and the passage of time.

Profit sharing from co-commercialization activities

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axatilimab co-commercialization efforts and record 100% of all product revenues and associated costs in accordance with our profit sharing from co-commercialization activities accounting policy outlined in our Annual Report on Form 10-K for the year ended December 31, 2024.

For the three months ended March 31, 2025, we recorded $13.6 million of revenues from sales of axatilimab and a nominal loss from co-commercialization activities.

For the three and six months ended June 30, 2025, we recorded revenues of $36.2 million and $49.8 million, respectively, from sales of NIKTIMVO (axatilimab), and total associated costs of $15.2 million and $28.9 million respectively, from co-commercialization activities.

Non-operating Income and Expenses

Interest income

Interest income for the three months ended March 31, 2025 and 2024 was $22.9 million and $46.8 million, respectively.

The decrease in Interest income for the three months ended March 31, 2025 primarily relates to a decrease in interest earned on our cash equivalents and marketable securities generally due to lower cash equivalent and marketable securities balance in first quarter of 2025 as compared to the corresponding period in 2024.

Interest income for the three and six months ended June 30, 2025 was $25.1 million and $48.1 million, respectively.

Interest income for the three and six months ended June 30, 2024 was $41.5 million and $88.2 million, respectively.

The decrease in Interest income for the three and six months ended June 30, 2025 is primarily due to lower interest rates and cash and cash equivalent balances in 2025 as compared to the corresponding periods in 2024.

(Loss) gain on equity investments

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Three Months Ended

(in millions)

June 30, Six Months Ended

2025 2024 2025 2024

(in millions) (in millions)

Agenus $ — $ 3.1 $ — $ 0.1

Merus — 40.0 — 110.2

MorphoSys — 0.8 — 30.7

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Provision for income taxes

The provision for income taxes for the three months ended March 31, 2025 and 2024 was $76.0 million and $66.6 million, respectively.

Our effective tax rate for the three months ended March 31, 2025 was higher than the U.S.

The provision for income taxes for the three and six months ended June 30, 2025 was $153.0 million and $229.0 million, respectively.

The provision for income taxes for the three and six months ended June 30, 2024 was $54.8 million and $121.4 million, respectively.

Our effective tax rate for the three and six months ended June 30, 2025 was higher than the U.S.

statutory rate primarily due to an increase in our valuation allowance against certain U.S.

federal and state deferred tax assets and foreign losses with no associated tax benefit (i.e., full valuation allowance).

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.

Our effective tax rate for the three and six months ended June 30, 2024 was higher than the U.S.

statutory rate primarily due to a non-deductible charge of $710.9 million associated with the Escient acquisition.

Liquidity and Capital Resources

At March 31, 2025, we had available cash, cash equivalents and marketable securities of $2.4 billion.

At June 30, 2025, we had available cash, cash equivalents and marketable securities of $2.4 billion.

Our cash and marketable securities balances are primarily held in a variety of interest-bearing instruments, including money market accounts and U.S.

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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.

Net cash provided by operating activities for the three months ended March 31, 2025 was $266.1 million and net cash provided by operating activities for the three months ended March 31, 2024 was $218.8 million.

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

Net cash provided by operating activities for the six months ended June 30, 2025 was $310.8 million and net cash used in operating activities for the six months ended June 30, 2024 was $356.8 million.

The increase in cash provided by operating activities was due primarily to the changes in net income as a result of the contract dispute settlement during the second quarter of 2025 and the Escient acquisition during the second quarter of 2024.

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

Net cash provided by investing activities was $1.1 million for the three months ended March 31, 2025, which primarily represented by sales and maturities of marketable securities of $45.5 million, offset in part by purchases of marketable securities of $41.2 million and capital expenditures of $3.2 million.

Net cash used in investing activities was $73.1 million for the three months ended March 31, 2024, which represented purchases of marketable securities of $165.8 million, and capital expenditures of $9.5 million, offset in part by the sales and maturities of marketable securities of $102.2 million.

Net cash used in investing activities was $17.8 million for the six months ended June 30, 2025, which primarily represented by purchases of marketable securities of $97.3 million and capital expenditures of $22.2 million, offset in part by maturities of marketable securities of $101.8 million.

Net cash provided by investing activities was $140.7 million for the six months ended June 30, 2024, which primarily represented sales of equity investments of $227.3 million and maturities of marketable securities of $182.6 million, offset in part by purchases of marketable securities of $204.1 million, and capital expenditures of $63.7 million.

In the future, net cash used by investing activities may fluctuate significantly from period to period due to the timing of strategic equity investments, acquisitions, and capital expenditures and maturities/sales and purchases of marketable securities.

Net cash used in financing activities was $12.7 million and $12.4 million for the three months ended March 31, 2025 and 2024, respectively, primarily representing cash paid to ARIAD/Takeda for contingent consideration and cash paid for tax withholdings related to restricted and performance share vesting.

Net cash used in financing activities was $23.9 million for the six months ended June 30, 2025, primarily representing the $19.1 million paid for excise taxes relating to the June 2024 share repurchase, cash paid for tax withholdings related to restricted and performance share vesting and cash paid to ARIAD/Takeda for contingent consideration, partially offset by proceeds from issuance of common stock under our stock plans.

Net cash used in financing activities was $2.01 billion for the six months ended June 30, 2024 and was primarily driven by expenditures associated with the share repurchase of $2.00 billion.

In August 2021, we entered into a $500.0 million, senior unsecured revolving credit facility, which was subsequently amended in May 2023 and June 2024 (as amended, the “Credit Agreement”).

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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 March 31, 2025, we had no outstanding borrowings and were in compliance with all covenants under this facility.

As of June 30, 2025, we had no outstanding borrowings and were in compliance with all covenants under this facility.

The Credit Agreement is described further in Note 16 of Notes to the Condensed Consolidated Financial Statements.

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.

As of June 30, 2025, our U.S.

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

The enactment of the One Big Beautiful Bill Act on July 4, 2025 modified key provisions of the Tax Cuts and Jobs Act of 2017 that may have an impact on our U.S.

tax liabilities.

We are evaluating the potential impacts of the modified provisions.

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-Q

Item 2. Management’s Discussion and Analysis