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Item 7. Management’s Discussion and Analysis

2026-02-10 compared with 2025-02-10 · 88 added, 76 removed, 221 unchanged (43% of the section changed)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Consolidated Financial Data” and the Consolidated Financial Statements and related Notes included elsewhere in this Report.

A discussion of our financial performance for the year ended December 31, 2024 as compared to the year ended December 31, 2023 appears below under the captions “Results of Operations” and “Liquidity and Capital Resources.” A discussion of our financial performance for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found under the same captions in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 13, 2024, which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at investor.incyte.com/financial-information/annual-reports .

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and related Notes included elsewhere in this report.

A discussion of our financial performance for the year ended December 31, 2025 as compared to the year ended December 31, 2024 appears below under the captions “Results of Operations” and “Liquidity and Capital Resources.” A discussion of our financial performance for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found under the same captions in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 10, 2025, which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at investor.incyte.com/financials/annual-reports .

These website addresses are intended to be inactive, textual references only.

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

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

Through the discovery, development and commercialization of proprietary therapeutics, Incyte has established a portfolio of first-in-class and best-in-class medicines for patients and a strong pipeline of products focused in three core therapeutic areas:

Oncology, Inflammation & Autoimmunity, and Myeloproliferative Neoplasms (MPNs) & Graft-Versus-Host Disease (GVHD).

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

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

These therapeutic areas are:

Hematology, Oncology, and Inflammation and Autoimmunity (“IAI”).

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

Our portfolio focuses on areas of high unmet medical need and includes compounds in various stages, ranging from preclinical to late-stage development, and commercialized products JAKAFI (ruxolitinib), ICLUSIG (ponatinib), PEMAZYRE (pemigatinib), OPZELURA (ruxolitinib cream), MINJUVI (tafasitamab), MONJUVI (tafasitamab-cxix) and ZYNYZ (retifanlimab-dlwr), as well as NIKTIMVO (axatilimab-csfr), which was approved for medical use in the United States in August 2024 and will be co-commercialized.

Our portfolio focuses on areas of high unmet medical need and includes compounds in various stages, ranging from preclinical to late-stage development and commercialized products.

Our approved products are JAKAFI (ruxolitinib), ICLUSIG (ponatinib), PEMAZYRE (pemigatinib), OPZELURA (ruxolitinib cream), MINJUVI (tafasitamab), MONJUVI (tafasitamab-cxix) and ZYNYZ (retifanlimab-dlwr), as well as NIKTIMVO (axatilimab-csfr) which is co-commercialized.

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

We must develop and commercialize new products to achieve revenue growth and to offset revenue losses from when products lose their exclusivity or when competing products are launched.

For additional information, including information on the expirations of patents for various products, see Part I, Item 1 of this report, “Business—Patents and Other Intellectual Property” and “Business—Competition.” We devote substantial resources to research and development activities and to acquire rights to new product candidates and technologies, but successful product development in the biopharmaceutical industry is highly uncertain.

We must develop and commercialize new products to achieve revenue growth and to offset revenue losses from the loss of product exclusivity of JAKAFI in 2028 and the launch of competing products.

For additional information, including information on the expirations of patents for various products, see Part I, Item 1 of this report, under the headings “Business—Patents, Other Intellectual Property, and Product Exclusivity” and “Business—Competition.” We devote substantial resources to research and development activities and to acquire rights to new product candidates and technologies, but successful product development in the biopharmaceutical industry is highly uncertain.

Our product revenues also face challenges from economic conditions and drug pricing initiatives driven by governments and private payors.

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

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

License Agreements, Business Relationships and Acquisitions

We establish business relationships, including collaborative arrangements with other companies and medical research institutions, to assist in the clinical development and/or commercialization of certain of our drugs and drug candidates and to provide support for our research programs.

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

We also evaluate opportunities for acquiring products or rights to products and technologies that are complementary to our business from other companies and medical research institutions.

Critical Accounting Policies and Significant Estimates

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

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

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

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

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Rebates and Discounts:

We accrue rebates for mandated discounts under the Medicaid Drug Rebate Program in the United States and mandated discounts in Europe in markets where government-sponsored healthcare systems are the primary payers for healthcare.

These accruals are based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launch.

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Chargebacks are discounts that occur when certain indirect contracted customers purchase directly from our wholesalers at a discounted price.

The wholesalers, in turn, charges back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers.

The wholesalers, in turn, charge back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers.

In addition to actual chargebacks received, we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on hand in our distribution channel.

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

Medicare Part D Coverage Gap:

Medicare Part D prescription drug benefit mandates manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients.

Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our customers.

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

Medicare Part D Rebates:

Changes to our Medicare Part D prescription drug coverage reimbursements (“Part D Discount Program”) became effective January 1, 2025 pursuant to the Inflation Reduction Act of 2022.

Under the revised Part D Discount Program, manufacturers must give a 10 percent discount on Part D drugs in the initial coverage phase, and a 20 percent discount on Part D drugs in the so-called “catastrophic phase” (the phase after the patient incurs costs above the initial phase out-of-pocket threshold, which is $2,000 beginning in 2025).

The Inflation Reduction Act includes certain exemptions for small biotech drug manufacturers, including Incyte.

These exemptions apply on a drug-specific basis, and qualifying drugs will be exempt from possible negotiation through 2028 and subject to reduced discounts that will be phased-in over a number of years under the new Part D benefit.

In 2025, we saw a reduction in our sales allowances owed under Medicare Part D, due to changes to the Part D Discount Program.

Prior to the changes in the Medicare Part D Discount Program effective January 1, 2025, the Medicare Part D prescription drug benefit previously mandated manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients.

Our estimates for the expected Medicare Part D coverage gap were based on historical invoices received and in part from data received from our customers.

Funding of the Medicare Part D Discount Program is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters.

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

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Royalty revenues on commercial sales for OLUMIANT by Lilly are estimated based on information provided by Lilly.

Royalty revenues on commercial sales for PEMAZYRE by Innovent are estimated based on information provided by Innovent.

We recognize royalty revenues in the period the sales occur.

We exercise judgment in determining whether the information provided is sufficiently reliable for us to base our royalty revenue recognition thereon.

If actual royalties vary from estimates, we may need to adjust the prior period, which would affect royalty revenue and receivable in the period of adjustment.

If actual royalties vary from estimates, we may need to adjust the prior period, which would affect royalty revenue and receivables in the period of adjustment.

Historically, adjustments to these estimates to reflect actual royalty revenues have not been material to our financial results and have been less than 1% of royalty revenues.

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The stock compensation process requires the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility over the option term and expected option lives, as well as expected forfeiture rates and the probability of PSUs vesting.

For the years ending December 31, 2024 and 2023, our Black-Scholes assumptions included a weighted-average stock price volatility of 30% in 2024 and 32% in 2023, average expected option life of approximately five years and an estimated annualized forfeiture rate of 5%.

The average risk-free interest rate assumption used in the Black-Scholes valuations increased from 4.01% in 2023 to 4.15% in 2024.

For the years ending December 31, 2025 and 2024, our Black-Scholes assumptions included a weighted-average stock price volatility of 29% in 2025 and 30% in 2024, and average expected option life of approximately five years.

The average risk-free interest rate assumption used in the Black-Scholes valuations decreased from 4.15% in 2024 to 4.10% in 2025.

The fair value of stock options, which are subject to graded vesting, are recognized as compensation expense over the requisite service period using the accelerated attribution method.

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We record estimates and prepare and file tax returns in various jurisdictions across the United States, Canada, Europe and Asia based upon our interpretation of local tax laws and regulations.

While we exercise significant judgment when applying complex tax laws and regulations in these various taxing jurisdictions, many of our tax returns are open to audit, and may be subject to future tax, interest, and penalty assessments.

While we exercise significant judgment when applying complex tax laws and regulations in these various taxing jurisdictions, many of our tax returns are open to audit and we may be subject to future tax, interest, and penalty assessments.

We believe our estimates for the valuation allowances against certain deferred tax assets and the amount of benefits associated with uncertain tax positions recognized in our financial statements are appropriate based upon our assessment of the factors mentioned above.

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MINJUVI/MONJUVI revenues, net 144.6 119.3

NIKTIMVO revenues, net 151.6 —

ZYNYZ revenues, net 66.3 3.2

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TABRECTA product royalty revenues 26.7 22.7

PEMAZYRE product royalty revenues 2.2 1.9

Other product royalty revenues 7.9 2.2

Total product royalty revenues 636.9 579.3

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Total revenues $ 5,141.2 $ 4,241.2

The increase in JAKAFI product revenues from 2023 to 2024 was comprised of a volume increase of $142.3 million and a price increase of $56.1 million.

The increase for the year ended December 31, 2024 as compared to the corresponding period in 2023 was primarily driven by an increase in paid demand across all indications.

The increase in OPZELURA net product revenues from 2023 to 2024 was comprised of a volume increase of $165.3 million and a price increase of $5.1 million.

The increase was driven by continued growth in new patient starts and refills, and approximately $60.7 million of OPZELURA net product revenues for 2024 were from Europe.

The increase in MINJUVI/MONJUVI net product revenues for the year ended December 31, 2024 compared to the prior period was driven by the acquisition completed in February 2024, under which we gained exclusive global rights to tafasitamab marketed in the United States as MONJUVI (tafasitamab-cxix).

Refer to Note 5 of Notes to the Consolidated Financial Statements for further information related to the acquisition.

The increase in JAKAFI product revenues from 2024 to 2025 was primarily driven by an increase in paid demand across all indications.

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

The increase in OPZELURA net product revenues from 2024 to 2025 was primarily due to increased patient demand and refills in the U.S.

in both atopic dermatitis and vitiligo.

Additionally, $130.0 million of net product revenues for 2025 were from outside of the U.S., driven by continued uptake in France and Italy to treat vitiligo.

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

NIKTIMVO net product revenues for 2025 reflect continued strong uptake of the product following its commercial launch during the first quarter of 2025.

The increase in ZYNYZ net product revenues from 2024 to 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 from 2024 to 2025 was primarily driven by growth in JAKAVI royalty revenue.

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

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We brought a lawsuit against the U.S.

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

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

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

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

Our company-sponsored patient savings program in which we provide financial assistance to enable commercially-insured patients to afford their insurance premium and co-pays may fluctuate as the commercial insurance landscape evolves and may impact net revenues, particularly for drugs like OPZELURA.

Our company-sponsored patient savings program, by which we provide financial assistance to enable commercially-insured patients to afford their insurance premiums and co-pays, may fluctuate as the commercial insurance landscape evolves and may impact net revenues, particularly for drugs like OPZELURA.

We also adjust our allowance for product returns based on new information regarding actual returns as it becomes available.

We expect our sales allowances to fluctuate from quarter to quarter due to changes in the volume of purchases eligible for government mandated discounts and rebates as well as changes in discount percentages, which are impacted by potential future price increases, rate of inflation, and other factors, such as changes to the 340B drug pricing program.

In 2025, we expect to see a reduction in our sales allowances owed under Medicare Part D, due to changes from the Inflation Reduction Act, which effective January 1, 2025, replaced the manufacturer's coverage gap liability with a different discount structure.

We expect our sales allowances to fluctuate from quarter to quarter as a result of the volume of purchases eligible for government mandated discounts and rebates as well as changes in discount percentages which are impacted by potential future price increases, rate of inflation, and other factors.

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

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.

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

Our milestone and contract revenues were $150.0 million and $43.0 million for the years ended December 31, 2025 and 2024, respectively.

During the year ended December 31, 2024, our milestone and contract revenues were derived from a $25.0 million upfront payment received during the first quarter of 2024 upon our transfer of functional intellectual property to China Medical Systems Holdings Limited, and we recognized $18.0 million of upfront and milestone payments from two of our collaboration partners during the third quarter of 2024.

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

During the year ended December 31, 2025, our milestone and contract revenues were derived from a combination of upfront payments received from our third party collaborators for the transfer of functional intellectual property, primarily the $100.0 million payment received from Lilly in the fourth quarter of 2025, as well as developmental milestones received from our third party collaborators.

During the year ended December 31, 2024, our milestone and contract revenues were derived from a combination of upfront payments received from our third party collaborators for the transfer of functional intellectual property, as well as developmental milestones received from our third party collaborators.

Cost of Product Revenues

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Royalty expense 124.6 141.0

Profit share 44.0 —

Amortization of definite-lived intangible assets 25.6 23.6

Total cost of product revenues $ 372.1 $ 312.1

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

The increase in cost of product revenues from 2023 to 2024 was primarily due to growth in net product revenues, increased royalty expense and increased manufacturing related costs.

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 the amortization of capitalized milestone payments.

The increase in cost of product revenues from 2024 to 2025 was driven by growth in net product revenues, the NIKTIMVO profit share and increased manufacturing related costs, partially offset by the impact from the reduced royalty rate agreed to as part of the contract dispute settlement with Novartis discussed below.

Contract Dispute Settlement

As described further in Note 7 of Notes to the 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 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 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 ended 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 consolidated statement of operations for the year ended December 31, 2025.

Operating Expenses

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

Additionally, as described in Note 5 of the Notes to the Consolidated Financial Statements, as part of the Escient acquisition, 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 consolidated statements of operations.

Additionally, as described in Note 5 of the Notes to the Consolidated Financial Statements, as part of the Escient acquisition, we recognized compensation expense in research and development of $11.3 million on our consolidated statements of operations during the year ended December 31, 2024 associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition.

Research and development expenses for the year ended December 31, 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.

The increase in clinical research and outside services expense from 2023 to 2024 was primarily due to continued investment in our late-stage development assets, additional expenses resulting from the Escient acquisition and timing of certain expenses.

The increase in clinical research and outside services expense from 2024 to 2025 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, which were $97.6 million and $104.4 million for the years ended December 31, 2025 and 2024, respectively.

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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 pre-clinical and clinical trial related activities.

Many factors can affect the cost and timing of our clinical trials, including requests by regulatory agencies for more information, inconclusive results requiring additional clinical trials, slow patient enrollment, adverse side effects among patients, insufficient supplies for our clinical trials, timing of drug supply, including API, and real or perceived lack of effectiveness or safety of our investigational drugs in our clinical trials.

Many factors can affect the cost and timing of our clinical trials, including requests by regulatory agencies for more information, inconclusive results requiring additional clinical trials, slow patient enrollment, adverse side effects among patients, insufficient supplies for our clinical trials, timing of drug supply, including active pharmaceutical ingredients, and real or perceived lack of effectiveness or safety of our investigational drugs in our clinical trials.

In addition, the development of all of our products will be subject to extensive governmental regulation.

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Salary and benefits related expense increased from 2024 to 2025 due primarily to increased headcount.

This increased headcount was due primarily to the establishment of our dermatology commercial organization.

Additionally, as described in Note 5 of the Notes to the Consolidated Financial Statements, as part of the Escient acquisition, 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 consolidated statements of operations.

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

Additionally, as described in Note 5 of the Notes to the Consolidated Financial Statements, as part of the Escient acquisition, we recognized compensation expense in selling, general and administrative expenses of $20.2 million on our consolidated statements of operations during the year ended December 31, 2024 associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition.

Asset impairment

As described further in Note 8 of Notes to the Consolidated Financial Statements, during December 2025, the downtown Wilmington, Delaware properties that we acquired in May 2024 met the criteria to be classified as assets held for sale.

As a result of this classification, we recorded an asset impairment charge of $76.3 million on our consolidated statement of operations for the year ended December 31, 2025 relating to the downtown Wilmington properties in order to reflect the properties at the lower of their carrying amount or estimated fair value less cost to sell as of December 31, 2025.

The estimated fair value less cost to sell of the properties has been recorded within the Prepaid expenses and other current assets line item on our consolidated balance sheet as of December 31, 2025.

(Gain) 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 fair value of the acquisition-related contingent consideration is remeasured quarterly.

The change in fair value of the acquisition-related contingent consideration for the years ended December 31, 2024 and 2023 was expense of $19.8 million and $29.2 million, respectively, which is recorded in loss on change in fair value of acquisition-related contingent consideration on the consolidated statements of operations.

The loss on change in fair value of the contingent consideration during the years ended December 31, 2024 and 2023 was due primarily to fluctuations in foreign currency exchange rates impacting future revenue projections of ICLUSIG and the passage of time.

Profit sharing from co-commercialization activities

Under the former collaboration and license agreement with MorphoSys, which was executed in March 2020 and continued through February 5, 2024 as described further in Note 5 of the Notes to the Consolidated Financial Statements, we and MorphoSys were both responsible for the commercialization efforts of tafasitamab in the United States and shared equally the profits and losses from the co-commercialization efforts.

For the period from January 1, 2024 through February 5, 2024, our 50% share of the profits for tafasitamab was $1.0 million, as recorded in (profit) and loss sharing under collaboration agreements on the consolidated statement of operations.

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

Under the collaboration agreement with Syndax, as described further in Note 7 of the Notes to the Consolidated Financial Statements, we and Syndax are both responsible for the co-commercialization of axatilimab in the United States and share equally in the profits and losses from those efforts.

We are the principal in the U.S.

axatilimab co-commercialization efforts and will record 100% of all product revenues and associated costs in accordance with our profit sharing from co-commercialization activities accounting policy outlined in Note 1 of the Notes to the Consolidated Financial Statements.

For the year ended December 31, 2024, there were no revenues from sales of axatilimab, however, there was $22.4 million of expense incurred in connection with the co-commercialization efforts, 50% of which is recorded as selling, marketing and administrative expense in our consolidated statement of operations.

The change in fair value of the acquisition-related contingent consideration for the years ended December 31, 2025 and 2024 was a gain of $6.1 million and loss of $19.8 million, respectively, which is recorded in (gain) loss on change in fair value of acquisition-related contingent consideration on the consolidated statements of operations.

The change in fair value of the contingent consideration during the years ended December 31, 2025 and 2024 was due primarily to updated projections of future net revenues and related royalties of ICLUSIG, including the impacts from fluctuations in foreign currency exchange rates, and the passage of time.

Non-operating Income and Expenses

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Interest income for the years ended December 31, 2025 and 2024 was $105.6 million and $128.7 million, respectively.

The decrease in Interest income for the year ended December 31, 2024 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 the second half of 2024 as compared to the corresponding period in 2023.

Realized and unrealized gain (loss) on equity investments

Realized and unrealized gains and losses on equity investments will fluctuate from period to period, based on sales of securities and the change in fair value of the securities we hold in our publicly held collaboration partners.

The following table provides a summary of those realized and unrealized gains and (losses):

For the Years Ended,

The decrease in Interest income for the year ended December 31, 2025 is primarily due to a lower interest rate environment in 2025 as compared to 2024.

Gain on equity investments

Gains and losses on equity investments will fluctuate from period to period, based on sales of securities and the change in fair value of the securities we hold in our publicly held collaboration partners.

The following table provides a summary of those gains and (losses):

For the Years Ended December 31,

(in millions)

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Syndax 11.1 (11.9)

Prelude 10.3 —

Other (0.1) (0.7)

Total realized and unrealized gain on equity investments $ 116.0 $ 43.9

During the year ended December 31, 2024, we sold all remaining investments in Agenus Inc., Merus and MorphoSys AG as described further in in Note 7 of the Notes to the Consolidated Financial Statements.

Total gain on equity investments $ 21.3 $ 116.0

Provision for income taxes

The provision for income taxes for the years ended December 31, 2025 and 2024 was $377.8 million and $284.0 million, respectively.

Our effective tax rate of 89.7% for the year ended December 31, 2024 increased as compared to 28.4% for the prior year primarily due to non-deductible charges of $710.9 million associated with the Escient acquisition.

Our effective tax rate for 2024 was higher than the U.S.

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

Our effective tax rate for 2023 was higher than the U.S.

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

federal and state deferred tax assets.

Our effective tax rate for the year ended December 31, 2025 was higher than the U.S.

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

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 year ended December 31, 2024 was higher than the U.S.

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

Liquidity and Capital Resources

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Cash provided by operating activities.

The decrease in cash provided by operating activities from 2023 to 2024 was due primarily to the Escient acquisition and changes in working capital.

Cash used in investing activities.

The increase in cash provided by operating activities from 2024 to 2025 was primarily attributable 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, and changes in working capital.

Cash (used in) provided by investing activities.

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

During 2024, net cash provided by investing activities was $157.5 million, which primarily represented sales of equity investments of $284.8 million and sale and maturity of marketable securities of $231.3 million, offset in part by purchases of marketable securities of $258.4 million, payments for intangible assets of $13.9 million, and capital expenditures of $86.3 million.

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

Cash used in financing activities.

During 2024, net cash used in financing activities was $2.0 billion and was primarily driven by expenditures associated with the share repurchase of $2.0 billion.

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

During 2025, net cash used in investing activities was $102.6 million, which primarily represented purchases of marketable securities of $295.5 million, capital expenditures of $58.9 million and payments for intangible assets of $25.0 million, offset in part by maturities of marketable securities of $284.6 million.

During 2024, net cash provided by investing activities was $157.5 million, which primarily represented sales of equity investments of $284.8 million and maturity of marketable securities of $231.3 million, offset in part by purchases of marketable securities of $258.4 million, payments for intangible assets of $13.9 million, and capital expenditures of $86.3 million.

Cash provided by (used in) financing activities.

During 2025, net cash provided by financing activities was $101.0 million and was primarily driven by proceeds from the issuance of common stock under our stock plans net of tax withholdings, offset in part by excise taxes relating to the June 2024 share repurchase and cash paid to ARIAD/Takeda for contingent consideration.

During 2024, net cash used in financing activities was $2.0 billion, and was primarily driven by expenditures associated with the share repurchase.

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

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The Credit Agreement is described further in Note 17 of Notes to the Consolidated Financial Statements.

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

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

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.

The legislation introduces multiple elections and features various effective dates, with some provisions effective in 2025 and others in subsequent years.

The change related to the expensing of domestic research costs will materially reduce our U.S.

tax liabilities in 2025 and 2026.

We intend to continue to evaluate the impacts of these provisions for our tax return filing.

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.

10 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis