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Item 2. Management’s Discussion and Analysis

2021-05-04 compared with 2020-11-05 · 313 added, 418 removed, 492 unchanged (60% 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 and nine months ended September 30, 2020 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, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019 previously filed with the SEC.

The following discussion of our financial condition and results of operations as of and for the three months ended March 31, 2021 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, 2010 included in our Annual Report on Form 10-K for the year ended December 31, 2020 previously filed with the SEC.

Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties.

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These forward-looking statements include statements as to:

● the discovery, development, formulation, manufacturing and commercialization of our compounds, our drug candidates and JAKAFI ® /JAKAVI ® (ruxolitinib), PEMAZYRE ® (pemigatinib), ICLUSIG ® (ponatinib) and MONJUVI® (tafasitamab);

● our plans to further develop our operations outside of the United States;

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● our collaboration and strategic relationship strategy, and anticipated benefits and disadvantages of entering into collaboration agreements;

● our licensing, investment and commercialization strategies, including our plans to commercialize JAKAFI, PEMAZYRE, ICLUSIG and MONJUVI;

● our licensing, investment and commercialization strategies, including our plans to commercialize our drug products and drug candidates;

● the regulatory approval process, including obtaining U.S.

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● the need to raise additional capital;

● the costs associated with resolving matters in litigation;

● the costs associated with resolving matters in litigation and governmental proceedings;

● our expectations regarding competition;

● expectations relating to our new European headquarters and the anticipated completion date for our large molecule production facility;

● expectations relating to the anticipated completion dates for our Delaware headquarters expansion project and our large molecule production facility;

● our investments, including anticipated expenditures, losses and expenses;

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These risks and uncertainties could cause actual results to differ materially from those projected and include, but are not limited to:

● our ability to successfully commercialize JAKAFI, ICLUSIG, PEMAZYRE and MONJUVI;

● our ability to successfully commercialize our drug products and drug candidates;

● our ability to maintain at anticipated levels reimbursement for our products from government health administration authorities, private health insurers and other organizations;

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● our ability to in-license drug candidates or other technology;

● unanticipated construction, other delays or changes in plans relating to our new European headquarters and large molecule production facility;

● unanticipated construction, other delays or changes in plans relating to our Delaware headquarters expansion project and our large molecule production facility;

● our ability to integrate successfully acquired businesses, development programs or technology;

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

● our history of operating losses;

● risks relating to our ability to sustain profitability;

● risks related to public health pandemics such as the COVID-19 pandemic;

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We also refer to trademarks of other corporations and organizations in this Quarterly Report on Form 10-Q.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results.

You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A.

of this report, “Risk Factors,” before deciding whether to invest in our company.

● We depend heavily on JAKAFI/JAKAVI (ruxolitinib), and if we are not able to maintain revenues from JAKAFI/JAKAVI or those revenues decrease, our business may be materially harmed.

● If we or our collaborators are unable to obtain, or maintain at anticipated levels, reimbursement for JAKAFI/JAKAVI or our other products from government and other third-party payors, our results of operations and financial condition could be harmed.

● A limited number of specialty pharmacies and wholesalers represent a significant portion of revenues from JAKAFI, and the loss of, or significant reduction in sales to, any one of these specialty pharmacies or wholesalers could harm our operations and financial condition.

● If we are unable to establish and maintain effective sales, marketing and distribution capabilities, or to enter into agreements with third parties to do so, we will not be able to successfully commercialize our products.

● If we fail to comply with applicable laws and regulations, we could lose our approval to market our products or be subject to other governmental enforcement activity.

● If the use of our products harms or is perceived to harm patients, our regulatory approvals could be revoked or otherwise negatively impacted or we could be subject to costly product liability claims.

● If we market our products in a manner that violates various laws and regulations, we may be subject to civil or criminal penalties.

● Competition for our products, in particular JAKAFI/JAKAVI, could harm our business and result in a decrease in our revenue.

● The COVID-19 pandemic and measures to address the pandemic have adversely affected and can in the future adversely affect our business and results of operations.

● We or our collaborators may be unsuccessful in discovering and developing drug candidates, and we may spend significant time and money attempting to do so, in particular with our later stage drug candidates.

● If we or our collaborators are unable to obtain regulatory approval in and outside of the United States for drug candidates, we and our collaborators will be unable to commercialize those drug candidates.

● Health care reform measures could impact the pricing and profitability of pharmaceuticals, and adversely affect the commercial viability of our or our collaborators’ products and drug candidates.

● Conflicts between us and our collaborators or termination of our collaboration agreements could limit future development and commercialization of our drug candidates and harm our business.

● If we are unable to establish collaborations to fully exploit our drug discovery and development capabilities or if future collaborations are unsuccessful, our future revenue prospects could be diminished.

● If we fail to enter into additional in-licensing agreements or if these arrangements are unsuccessful, we may be unable to increase our number of successfully marketed products and our revenues.

● Even if one of our drug candidates receives regulatory approval, we may determine that commercialization would not be worth the investment.

● Any approved drug product that we bring to the market may not gain market acceptance by physicians, patients, healthcare payors and others in the medical community.

● We have limited capacity to conduct preclinical testing and clinical trials, and our resulting dependence on other parties could result in delays in and additional costs for our drug development efforts.

● We face significant competition for our drug discovery and development efforts, and if we do not compete effectively, our commercial opportunities will be reduced or eliminated.

● Our reliance on others to manufacture our drug products and drug candidates could result in drug supply constraints, delays in clinical trials, increased costs, and withdrawal or denial of regulatory approvals.

● If we fail to comply with the extensive legal and regulatory requirements affecting the health care industry, we could face increased costs, penalties and a loss of business.

● The illegal distribution and sale by third parties of counterfeit or unfit versions of our or our collaborators’ products or stolen products could harm our business and reputation.

● As most of our drug discovery and development operations are conducted at our headquarters in Wilmington, Delaware, the loss of access to this facility would negatively impact our business.

● If we lose any of our key employees or are unable to attract and retain additional personnel, our business and ability to achieve our objectives could be harmed.

● If we fail to manage our growth effectively, our ability to develop and commercialize products could suffer.

● We may acquire businesses or assets, form joint ventures or make investments in other companies that may be unsuccessful, divert our management’s attention and harm our operating results and prospects.

● Risks associated with our operations outside of the United States could adversely affect our business.

● If product liability lawsuits are brought against us, we could face substantial liabilities and may be required to limit commercialization of our products, and our results of operations could be harmed.

● Because our activities involve the use of hazardous materials, we may be subject to claims relating to improper handling, storage or disposal of these materials that could be time consuming and costly.

● We expect to continue to incur significant expenses to discover and develop drugs, which could result in future losses and impair our achievement of and ability to sustain profitability in the future.

● If we are unable to raise additional capital in the future when we require it, our efforts to broaden our product portfolio or commercialization efforts could be limited.

● Our marketable securities and long term investments are subject to risks that could adversely affect our overall financial position.

● If we are unable to achieve milestones, develop product candidates to license or renew or enter into new collaborations, our royalty and milestone revenues and future prospects for those revenues may decrease.

● Any arbitration or litigation involving us and regarding intellectual property infringement claims could be costly and disrupt our drug discovery and development efforts.

● Our inability to adequately protect or enforce our proprietary information may result in loss of revenues or otherwise reduce our ability to compete.

● If the effective term of our patents is decreased or if we need to refile some of our patent applications, the value of our patent portfolio and the revenues we derive from it may be decreased.

● International patent protection is particularly uncertain and costly, and our involvement in opposition proceedings may result in the expenditure of substantial sums and management resources.

● Significant disruptions of information technology systems, breaches of data security, or unauthorized disclosures of sensitive data could harm our business and subject us to liability or reputational damage.

● Increasing use of social media could give rise to liability, breaches of data security, or reputational damage, which could harm our business and results of operations.

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

Our global headquarters is located in Wilmington, Delaware.

We conduct our European clinical development operations from our offices in Morges, Switzerland, our Japanese office is in Tokyo and we have been conducting operations in Canada since April 2020.

Effects of the COVID-19 Pandemic on Our Business

In December 2019, coronavirus disease of 2019, or COVID-19, was first reported in Wuhan, China.

In March 2020, the World Health Organization declared COVID-19 a pandemic (“the COVID-19 Pandemic”) and certain governments, including the State of Delaware where our primary offices and laboratory spaces are located, enacted stay-at-home orders and sweeping restrictions to travel and business activity were initiated by corporations and governments.

We took aggressive, proactive actions early on to protect the health of our employees, and their families, including voluntarily requiring almost all personnel across our global enterprise to work remotely and restricting access to our sites to personnel who were required to perform critical business continuity activities.

In May 2020, we initiated a return to full laboratory work at our facilities in Wilmington, Delaware, as well as a gradual return to office-based working, where allowed under local guidelines, at our offices in North America, Europe and Asia.

While we currently believe we are well-positioned to function in a hybrid on-site and virtual or remote fashion, the extent of the COVID-19 Pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, protective measures, and the reimposition of protective measures, implemented by governmental authorities or by us to protect our employees, and effects of the pandemic and such protective measures on our suppliers, collaborators, services providers and healthcare organizations serving patients, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

As a result, it is not currently possible to ascertain or predict the overall long-term impact of the COVID-19 Pandemic on our business.

To date, we have not seen a material effect on the results of our commercial operations, or our manufacturing supply chain, and we have increased manufacturing efforts of ruxolitinib to respond to the COVID-19 Pandemic and to pre-clinical and clinical study requests.

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

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

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

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

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

Until our return to full laboratory work, our discovery laboratories were staffed by essential personnel, and hence certain discovery programs experienced delays.

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

Clinical Trials to Address COVID-19

In April 2020, we announced the initiation of a Phase III clinical trial (RUXCOVID) to evaluate the efficacy and safety of ruxolitinib plus standard-of-care (SoC), compared to SoC therapy alone, in patients not on mechanical ventilation and who have COVID-19 associated cytokine storm.

Patient recruitment into RUXCOVID has been completed and we expect results to be available before the end of 2020.

We sponsor this collaborative study in the United States and our collaboration partner Novartis International Pharmaceutical Ltd.

sponsors the study outside of the United States.

We are also conducting a second Phase III clinical trial in multiple geographies, including the United States, to evaluate the efficacy and safety of ruxolitinib plus SoC, compared to SoC therapy alone, in COVID-19 patients on mechanical ventilation and who have acute respiratory distress syndrome (ARDS), a type of respiratory failure characterized by rapid onset of widespread inflammation in the lungs.

The SoC therapy is currently evolving and could be subject to change.

We have launched an Expanded Access Program in the United States to allow eligible patients with COVID-19 associated cytokine storm to receive ruxolitinib.

In April 2020, our collaboration partner Eli Lilly and Company announced that it has entered into an agreement with the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, to study baricitinib as an arm in NIAID's Adaptive COVID-19 Treatment Trial (ACTT-2).

The study is investigating the efficacy and safety of baricitinib as a potential treatment for hospitalized patients diagnosed with COVID-19 in the United States, and Lilly is also planning an expansion to include Europe and Asia.

In September 2020, we and Lilly announced initial results from ACTT-2, where baricitinib in combination with remdesivir reduced the time to recovery in comparison with remdesivir alone.

Additional data announced in October 2020 showed that baricitinib plus remdesivir resulted in a numerical decrease in mortality through Day 29 compared to remdesivir alone, with a more pronounced reduction seen in more severely ill patients.

In addition, in June 2020, Lilly announced that the first patient had been enrolled in a Phase III randomized, double-blind, placebo–controlled study (COV-BARRIER) to evaluate the efficacy and safety of baricitinib in hospitalized adults not on mechanical ventilation and who have COVID-19.

Marketed Indications - JAKAFI (ruxolitinib)

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

We also conduct commercial and clinical development operations from our European headquarters in Morges, Switzerland and our Japanese office in Tokyo.

As described in more detail below, we operate in two therapeutic areas that are defined by the indications of our approved medicines and the diseases for which our clinical candidates are being developed.

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

The other therapeutic area is Inflammation and Autoimmunity (IAI)/Dermatology commercial franchise.

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

Hematology and Oncology

Our hematology and oncology franchise is comprised of four approved products, which are JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix), PEMAZYRE (pemigatinib) and ICLUSIG (ponatinib), as well as numerous clinical development programs.

JAKAFI (ruxolitinib)

JAKAFI (ruxolitinib) is our first product to be approved for sale in the United States.

It was approved by the U.S.

Food and Drug Administration (FDA) in November 2011 for the treatment of adults with intermediate or high-risk myelofibrosis, in December 2014 for the treatment of adults with polycythemia vera who have had an inadequate response to or are intolerant of hydroxyurea and in May 2019 for the treatment of steroid-refractory acute graft-versus-host disease (GVHD) in adult and pediatric patients 12 years and older .

Myelofibrosis and polycythemia vera are both

myeloproliferative neoplasms (MPNs), a type of rare blood cancer, and GVHD is an adverse immune response to an allogeneic hematopoietic stem cell transplant (HSCT).

Under our collaboration agreement with Novartis, Novartis received exclusive development and commercialization rights to ruxolitinib outside of the United States for all hematologic and oncologic indications and sells ruxolitinib outside of the United States under the name JAKAVI.

Food and Drug Administration (FDA) in November 2011 for the treatment of adults with intermediate or high-risk myelofibrosis (MF), in December 2014 for the treatment of adults with polycythemia vera (PV) who have had an inadequate response to or are intolerant of hydroxyurea and in May 2019 for the treatment of steroid-refractory acute graft-versus-host disease (GVHD) in adult and pediatric patients 12 years and older .

Myelofibrosis and polycythemia vera are both myeloproliferative neoplasms (MPNs), a type of rare blood cancer, and GVHD is an adverse immune response to an allogeneic hematopoietic stem cell transplant (HSCT).

Under our collaboration agreement with our collaboration partner Novartis Pharmaceutical International Ltd., Novartis received exclusive development and commercialization rights to ruxolitinib outside of the United States for all hematologic and oncologic indications and sells ruxolitinib outside of the United States under the name JAKAVI.

In 2003, we initiated a research and development program to explore the inhibition of enzymes called janus associated kinases (JAK).

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JAKAFI remains the first-line standard of care in MF and remains the only FDA-approved product for PV and steroid-refractory acute GVHD.

The FDA has granted JAKAFI orphan drug status for MF, PV, ET, acute lymphoblastic leukemia (ALL) and GVHD.

To help ensure that all eligible patients have access to JAKAFI, we have established a patient assistance program called IncyteCARES (CARES stands for Connecting to Access, Reimbursement, Education and Support).

IncyteCARES helps ensure that any patient with intermediate or high-risk MF, uncontrolled PV or steroid-refractory acute GVHD who meets certain eligibility criteria and is prescribed JAKAFI has access to the product regardless of ability to pay and has access to ongoing support and educational resources during treatment.

The FDA has granted JAKAFI orphan drug status for MF, PV and GVHD.

JAKAFI is distributed primarily through a network of specialty pharmacy providers and wholesalers that allow for efficient delivery of the medication by mail directly to patients or direct delivery to the patient’s pharmacy.

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Myelofibrosis.

Myelofibrosis is a rare, life-threatening condition.

MF is a rare, life-threatening condition.

MF, considered the most serious of the myeloproliferative neoplasms, can occur either as primary MF, or as secondary MF that develops in some patients who previously had polycythemia vera or essential thrombocythemia.

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In this trial, patients treated with JAKAFI demonstrated superior hematocrit control and reductions in spleen volume compared to best available therapy.

In addition, a greater proportion of patients treated with JAKAFI achieved complete hematologic remission—which was defined as achieving hematocrit control, and lowering platelet and white blood cell counts.

In addition, a greater proportion of patients treated with JAKAFI

achieved complete hematologic remission—which was defined as achieving hematocrit control, and lowering platelet and white blood cell counts.

In the RESPONSE trial, the most common hematologic adverse reactions (incidence > 20%) were thrombocytopenia and anemia.

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In GVHD, the donated bone marrow or peripheral blood stem cells view the recipient’s body as foreign and attack various tissues.

12-month survival rates in patients with Grade III or IV steroid-

refractory acute GVHD are 50% or less, and the incidence of steroid-refractory acute and chronic GVHD is approximately 3,000 per year in the United States.

12-month survival rates in patients with Grade III or IV steroid-refractory acute GVHD are 50% or less, and the incidence of steroid-refractory acute and chronic GVHD is approximately 3,000 per year in the United States.

In June 2016, we announced that the FDA granted Breakthrough Therapy designation for ruxolitinib in patients with acute GVHD.

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We hold patents that cover the composition of matter and use of ruxolitinib, which patents, including applicable extensions, expire in late 2027.

Marketed Indications - ICLUSIG (ponatinib)

In June 2016, we acquired the European operations of ARIAD Pharmaceuticals, Inc.

(ARIAD) and obtained an exclusive license to develop and commercialize ICLUSIG (ponatinib) in Europe and other select countries.

ICLUSIG is a kinase inhibitor.

The primary target for ICLUSIG is BCR-ABL, an abnormal tyrosine kinase that is expressed in chronic myeloid leukemia (CML) and Philadelphia-chromosome positive acute lymphoblastic leukemia (Ph+ ALL).

In the European Union, ICLUSIG is approved for the treatment of adult patients with chronic phase, accelerated phase or blast phase CML who are resistant to dasatinib or nilotinib;

who are intolerant to dasatinib or nilotinib and for whom subsequent treatment with imatinib is not clinically appropriate;

or who have the T315I mutation, or the treatment of adult patients with Ph+ ALL who are resistant to dasatinib;

who are intolerant to dasatinib and for whom subsequent treatment with imatinib is not clinically appropriate;

or who have the T315I mutation.

Marketed Indications - PEMAZYRE (pemigatinib)

In April 2020, we announced that the FDA approved PEMAZYRE (pemigatinib), a selective fibroblast growth factor receptor (FGFR) inhibitor, for the treatment of adults with previously treated, unresectable locally advanced or metastatic cholangiocarcinoma with an FGFR2 fusion or other rearrangement as detected by an FDA-approved test.

PEMAZYRE is the first and only FDA-approved treatment for this indication, which was approved under accelerated approval based on overall response rate and duration of response (DOR).

Cholangiocarcinoma is a rare cancer that arises from the cells within the bile ducts.

It is often diagnosed late (stages III and IV) and the prognosis is poor.

The incidence of cholangiocarcinoma with FGFR2 fusions or rearrangements is increasing, and it is currently estimated that there are 2,000-3,000 patients in the United States, Europe and Japan.

The approval of PEMAZYRE was based on data from FIGHT-202, a multi-center, open-label, single-arm study evaluating PEMAZYRE as a treatment for adults with cholangiocarcinoma.

In FIGHT-202, and in patients harboring FGFR2 fusions or rearrangements (Cohort A), PEMAZYRE monotherapy resulted in an overall response rate of 36% (primary endpoint), and median DOR of 9.1 months (secondary endpoint).

Warnings and precautions included in the PEMAZYRE prescribing information include potential for eye problems such as dry or inflamed eyes, inflamed cornea, increased tears and a disorder of the retina;

high levels of phosphate in the blood;

and, for women who are pregnant, a risk of harm to the unborn baby or loss of pregnancy.

FIGHT-302, a Phase III trial of pemigatinib for the first-line treatment of patients with cholangiocarcinoma and FGFR2 fusions or rearrangements, is ongoing.

We have retained all rights to PEMAZYRE globally, other than those granted to Innovent Biologics, Inc.

to develop and commercialize pemigatinib in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

Marketed Indications - MONJUVI (tafasitamab-cxix)

MONJUVI (tafasitamab-cxix)

In January 2020, we and MorphoSys AG entered into a collaboration and license agreement to further develop and commercialize MorphoSys' proprietary anti-CD19 antibody tafasitamab (MOR208) globally.

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The most frequent serious adverse reactions were infections (26%), including pneumonia (7%) and febrile neutropenia (6%).

Clinical Programs in Oncology

We believe that the future of cancer treatment lies in the use of targeted therapies, which aim to block the effects of cancer-causing mutations, and immune therapies, which seek to recruit the patient’s own immune system to tackle cancer.

Our most advanced programs are detailed below.

JAK Inhibition

As part of our ongoing LIMBER (Leadership In MPNs BEyond Ruxolitinib) clinical development initiative, which is designed to improve and expand therapeutic options for patients with myeloproliferative neoplasms, we are evaluating combinations of ruxolitinib with other therapeutic modalities, as well as developing a once-a-day formulation of ruxolitinib for potential use as monotherapy and combination therapy.

Based on positive Phase II data, we are preparing a pivotal trial program of ruxolitinib in combination with parsaclisib (PI3Kδ) as both first-line therapy for MF patients and in MF patients with an inadequate response to ruxolitinib monotherapy.

Additional Phase II trials combining ruxolitinib with investigational agents from our portfolio such as INCB57643 (BET) and INCB00928 (ALK2) in patients with MF are in preparation.

As part of our development efforts to evaluate JAK inhibition in GVHD, the REACH clinical program is evaluating ruxolitinib in patients with steroid-refractory GVHD and includes REACH2, a Novartis-sponsored Phase III trial in steroid-refractory acute GVHD, and REACH3, a Phase III trial in steroid-refractory chronic GVHD that is co-sponsored by Incyte and Novartis.

PEMAZYRE (pemigatinib)

In April 2020, we announced that the FDA approved PEMAZYRE (pemigatinib), a selective fibroblast growth factor receptor (FGFR) kinase inhibitor, for the treatment of adults with previously treated, unresectable locally advanced or metastatic cholangiocarcinoma with an FGFR2 fusion or other rearrangement as detected by an FDA-approved test.

PEMAZYRE is the first and only FDA-approved treatment for this indication, which was approved under accelerated approval based on overall response rate and duration of response (DOR).

In March 2021, PEMAZYRE was approved by the Japanese Ministry of Health, Labour and Welfare (MHLW) for the treatment of patients with unresectable biliary tract cancer (BTC) with an FGFR2 fusion gene, worsening after cancer chemotherapy.

Also in March 2021, PEMAZYRE was approved by the European Commission (EC) for the treatment of adults with locally advanced or metastatic cholangiocarcinoma with an FGFR2 fusion or rearrangement that have progressed after at least one prior line of systemic therapy.

PEMAZYRE is the first internally discovered product to be globally commercialized by us.

Cholangiocarcinoma is a rare cancer that arises from the cells within the bile ducts.

It is often diagnosed late (stages III and IV) and the prognosis is poor.

The incidence of cholangiocarcinoma with FGFR2 fusions or rearrangements is increasing, and it is currently estimated that there are 2,000-3,000 patients in the United States, Europe and Japan.

The approval of PEMAZYRE was based on data from FIGHT-202, a multi-center, open-label, single-arm study evaluating PEMAZYRE as a treatment for adults with cholangiocarcinoma.

FIGHT-302, a Phase III trial of pemigatinib for the first-line treatment of patients with cholangiocarcinoma and FGFR2 fusions or rearrangements, is ongoing.

We have retained all rights to PEMAZYRE globally, other than those granted to Innovent Biologics, Inc.

to develop and commercialize pemigatinib in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

ICLUSIG (ponatinib)

In June 2016, we acquired the European operations of ARIAD Pharmaceuticals, Inc.

and obtained an exclusive license to develop and commercialize ICLUSIG (ponatinib) in Europe and other select countries.

ICLUSIG is a kinase inhibitor.

The primary target for ICLUSIG is BCR-ABL, an abnormal tyrosine kinase that is expressed in chronic myeloid leukemia (CML) and Philadelphia-chromosome positive acute lymphoblastic leukemia (Ph+ ALL).

In the European Union, ICLUSIG is approved for the treatment of adult patients with chronic phase, accelerated phase or blast phase CML who are resistant to dasatinib or nilotinib;

who are intolerant to dasatinib or nilotinib and for whom subsequent treatment with imatinib is not clinically appropriate;

or who have the T315I mutation, or the treatment of adult patients with Ph+ ALL who are resistant to dasatinib;

who are intolerant to dasatinib and for whom subsequent treatment with imatinib is not clinically appropriate;

or who have the T315I mutation.

Clinical Programs in Hematology and Oncology

Ruxolitinib and itacitinib

In October 2019, we and Novartis announced that REACH2 met its primary endpoint of superior ORR at Day 28 with ruxolitinib treatment compared to best available therapy.

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In April 2020, we and Novartis announced that data from REACH2 were published in the New England Journal of Medicine.

In July 2020, we and Novartis announced that REACH3 met its primary endpoint of superior ORR at Month 6 with ruxolitinib treatment compared to best available therapy, as well as both key secondary endpoints, significantly improving patient-reported symptoms and failure-free survival.

In July 2020, we and Novartis announced that REACH3 met its primary endpoint of superior ORR at Month 6 with ruxolitinib treatment compared to best available therapy (BAT), as well as both key secondary endpoints, significantly improving patient-reported symptoms and failure-free survival.

No new safety signals were observed, and the ruxolitinib safety profile in REACH3 was consistent with that seen in previously reported studies in steroid-refractory chronic GVHD.

Additional data announced in December 2020 showed that best overall response (BOR) rate, defined as any response up to week 24, was achieved in a significantly higher percentage of patients with ruxolitinib therapy compared to BAT.

An sNDA seeking FDA approval of ruxolitinib in steroid-refractory chronic GVHD has been accepted for Priority Review.

A second JAK inhibitor in development is itacitinib, which is a selective JAK1 inhibitor.

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The FDA has granted itacitinib orphan drug status for GVHD.

FGFR Inhibition

Based on positive Phase II data, we opened two pivotal trials of ruxolitinib in combination with parsaclisib (PI3Kδ) in first-line MF (LIMBER-313) and in MF patients with a suboptimal response to ruxolitinib monotherapy (LIMBER-304), respectively, and both trials are ongoing.

Additional Phase II trials combining ruxolitinib with investigational agents from our portfolio such as INCB57643 (BET) and INCB00928 (ALK2) in patients with MF are in preparation, and additional discovery and development initiatives are also ongoing within the LIMBER program, which are evaluating both internally-discovered compounds, including itacitinib (JAK1), and candidates from collaboration partners.

Tafasitamab is an anti-CD19 antibody and is being investigated as a therapeutic option in B cell malignancies in a number of ongoing and planned combination trials.

An open-label Phase II combination trial (L-MIND) is investigating the safety and efficacy of tafasitamab in combination with lenalidomide in patients with relapsed or refractory diffuse large B-cell lymphoma (r/r DLBCL), and the ongoing Phase III B-MIND trial is assessing the combination of tafasitamab and bendamustine versus rituximab and bendamustine in r/r DLBCL.

firstMIND is a Phase Ib safety trial of tafasitamab as a first-line therapy for patients with DLBCL, and frontMIND, a placebo-controlled Phase III trial evaluating tafasitamab in

combination with lenalidomide added to rituximab plus chemotherapy (R-CHOP) as a first-line therapy for patients with DLBCL, is planned to begin in 2021.

A placebo-controlled Phase III trial (inMIND) of tafasitamab added to lenalidomide plus rituximab (R 2 ) in patients with relapsed or refractory follicular or marginal zone lymphomas is ongoing, and we are preparing to initiate both a proof-of-concept study (topMIND) of tafasitamab in combination with parsaclisib (PI3Kδ) in patients with relapsed or refractory B-cell malignancies and a proof-of-concept study of tafasitamab, lenalidomide and plamotamab in patients with r/r DLBCL.

In May 2020, we announced the validation of the European Marketing Authorization Application (MAA) for tafasitamab seeking approval of tafasitamab in combination with lenalidomide, followed by tafasitamab monotherapy, for the treatment of adult patients with r/r DLBCL;

the validation of the MAA by the European Medicines Agency (EMA) confirms that the submission is ready to enter the formal review process.

In January 2021, we announced that Health Canada accepted the New Drug Submission (NDS) for tafasitamab in combination with lenalidomide, followed by tafasitamab monotherapy, as a treatment for adults with r/r DLBCL.

In January 2021, the FDA granted orphan drug designation to tafasitamab as a treatment for patients with follicular lymphoma.

Pemigatinib is a potent and selective inhibitor of the fibroblast growth factor receptor (FGFR) isoforms 1, 2 and 3 with demonstrated activity in preclinical studies.

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The program initially included three Phase II trials – FIGHT-201 in patients with bladder cancer, FIGHT-202 in patients with cholangiocarcinoma, and FIGHT-203 in patients with 8p11 myeloproliferative syndrome (8p11 MPN).

Based on data generated from these ongoing trials, we have initiated additional trials, including FIGHT-207, which is a solid tumor-agnostic trial evaluating pemigatinib in patients with driver-alterations of FGF/FGFR.

In April 2020, we announced the FDA approval of pemigatinib as PEMAZYRE for the treatment of adults with previously treated, unresectable locally advanced or metastatic cholangiocarcinoma with an FGFR2 fusion or other rearrangement as detected by an FDA-approved test.

Pemigatinib was previously granted Breakthrough Therapy designation by the FDA as a treatment for patients with previously treated, advanced/metastatic or unresectable FGFR2 translocated cholangiocarcinoma and has Breakthrough Therapy designation as a treatment for patients with myeloid/lymphoid neoplasms with FGFR1 rearrangement (8p11 MPN) who have relapsed or are refractory to initial chemotherapy.

In January 2020, we announced that the Marketing Authorization Application (MAA) for pemigatinib as a treatment of adults with locally advanced or metastatic cholangiocarcinoma (CCA) with an FGFR2 fusion or rearrangement that is relapsed or refractory after at least one line of systemic therapy had been validated by the European Medicines Agency (EMA).

In September 2020, we submitted a J-NDA seeking approval for pemigatinib as a treatment for CCA in Japan.

In October 2020, we announced that Health Canada accepted the New Drug Submission (NDS) for pemigatinib as a treatment for adults with previously treated, locally advanced or metastatic cholangiocarcinoma with FGFR2 fusion or other rearrangement.

Given the rapidly evolving treatment landscape for bladder cancer and recent regulatory feedback, we are reevaluating our development strategy for pemigatinib in bladder cancer.

As part of that reevaluation, new patient recruitment into FIGHT-205, which is assessing pemigatinib in cisplatin-ineligible bladder cancer patients whose tumors express FGFR3 mutation or rearrangement, has been stopped, and we no longer intend to use data from FIGHT-201 to seek accelerated approval for pemigatinib in patients with previously treated bladder cancer whose tumors express FGFR3 mutation or rearrangement.

CD19 antagonism

Tafasitamab is an anti-CD19 antibody and is being investigated as a therapeutic option in B cell malignancies in a number of ongoing and planned combination trials.

An open-label Phase II combination trial (L-MIND) is investigating

the safety and efficacy of tafasitamab in combination with lenalidomide in patients with relapsed or refractory diffuse large B-cell lymphoma (r/r DLBCL), and the ongoing Phase III B-MIND trial is assessing the combination of tafasitamab and bendamustine versus rituximab and bendamustine in r/r DLBCL.

First-MIND is a Phase Ib safety trial of tafasitamab as a first-line therapy for patients with DLBCL, and Front-MIND, a placebo-controlled Phase III trial evaluating tafasitamab in combination with lenalidomide added to rituximab plus chemotherapy (R-CHOP) as a first-line therapy for patients with DLBCL, is planned to begin in 2021.

A proof-of-concept study of tafasitamab in combination with parsaclisib (PI3Kδ) in patients with relapsed or refractory B-cell malignancies is in preparation, as is a placebo-controlled Phase III trial of tafasitamab added to lenalidomide plus rituximab in patients with relapsed or refractory follicular lymphoma.

PI3Kδ Inhibition

Based on data generated from these ongoing trials, we have initiated additional trials, including FIGHT-207, which is an ongoing solid tumor-agnostic trial evaluating pemigatinib in patients with driver-alterations of FGF/FGFR.

Pemigatinib has Breakthrough Therapy designation as a treatment for patients with myeloid/lymphoid neoplasms with FGFR1 rearrangement (8p11 MPN) who have relapsed or are refractory to initial chemotherapy.

The PI3Kδ pathway mediates oncogenic signaling in B cell malignancies.

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The FDA has granted orphan drug designation and Fast Track designation to parsaclisib as a treatment for patients with follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma.

PD-1 Antagonism

In December 2020, we announced preliminary results from the ongoing CITADEL monotherapy development program, which was designed to enable registration of parsaclisib.

Results from four cohorts were presented at the American Society of Hematology (ASH), including in r/r follicular lymphoma (CITADEL-203), in BTK-naïve r/r marginal zone lymphoma (CITADEL-204) and in both BTK-naïve and BTK-experienced r/r mantle cell lymphoma (CITADEL-205).

In October 2017, we and MacroGenics, Inc.

announced an exclusive global collaboration and license agreement for MacroGenics’ retifanlimab (formerly INCMGA0012), an investigational monoclonal antibody that inhibits PD-1.

Under this collaboration, we obtained exclusive worldwide rights for the development and commercialization of retifanlimab in all indications.

Under this collaboration, we obtained exclusive worldwide rights for the development and commercialization of

retifanlimab in all indications.

The molecule is currently being evaluated both as monotherapy and in combination therapy across various tumor types.

Potentially registration-enabling trials in squamous cell anal carcinoma (SCAC), microsatellite instability-high (MSI-H) endometrial cancer and Merkel cell carcinoma are ongoing.

In September 2020, we announced initial results from the Phase II POD1UM-202 trial of retifanlimab in patients with advanced SCAC who have progressed following standard platinum-based chemotherapy.

The Phase III POD1UM-303 trial of retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with SCAC is open for recruitment.

The Phase III POD1UM-304 trial evaluating retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with non-small cell lung cancer (NSCLC) is now recruiting patients, and in October 2020, our collaboration partner Zai Lab announced dosing of the first patient in China.

Retifanlimab has been granted Fast Track designation for the treatment of certain patients with advanced or metastatic MSI-H or DNA mismatch repair (dMMR) endometrial cancer and for the treatment of certain patients with locally advanced or metastatic SCAC.

The FDA and EMA have granted orphan drug designation to retifanlimab as a treatment for patients with locally advanced or metastatic SCAC and the FDA has granted orphan drug designation to retifanlimab as a treatment for patients with Merkel cell carcinoma.

Potentially registration-enabling trials in squamous cell carcinoma of the anal canal (SCAC), microsatellite instability-high (MSI-H) endometrial cancer and Merkel cell carcinoma are ongoing.

In January 2021, we announced that the FDA had accepted for Priority Review the Biologics License Application (BLA) for retifanlimab as a treatment for previously treated patients with advanced squamous cell carcinoma of the anal canal (SCAC) who have progressed following standard platinum-based chemotherapy.

In March 2021, the Marketing Authorization Application (MAA) seeking approval of retifanlimab in SCAC was validated by the European Medicines Agency (EMA).The submissions were based on data from the Phase II POD1UM-202 trial of retifanlimab in patients with locally advanced or metastatic SCAC who have progressed following standard platinum-based chemotherapy, preliminary results of which were presented at ESMO in September 2020.

The Phase III POD1UM-303 trial of retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with SCAC is underway.

The Phase III POD1UM-304 trial is evaluating retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with non-small cell lung cancer (NSCLC), and in October 2020, our collaboration partner Zai Lab announced dosing of the first patient in China.

Retifanlimab has been granted Fast Track designation for the treatment of certain patients with advanced or metastatic MSI-H or DNA mismatch repair (dMMR) endometrial cancer, for the treatment of certain patients with locally advanced or metastatic SCAC and for the treatment of Merkel cell carcinoma (MCC).

Indication and status

ruxolitinib (JAK1/JAK2)

Steroid-refractory chronic GVHD 1 :

Phase III (REACH3) 1 primary endpoint met

Myelofibrosis:

Phase III with parsaclisib (PI3Kδ) in preparation (1L and inadequate responders to ruxolitinib);

Phase II with INCB57643 (BET) and with INCB00928 (ALK2) in preparation

Once-a-day ruxolitinib (JAK1/JAK2)

Myelofibrosis and polycythemia vera:

clinical pharmacology studies

sNDA under Priority Review

itacitinib (JAK1)

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Phase III (GRAVITAS-309)

Once-a-day ruxolitinib (JAK1/JAK2)

Myelofibrosis, polycythemia vera and GVHD:

clinical pharmacology studies

ruxolitinib + parsaclisib

(JAK1/JAK2 + PI3Kδ)

Myelofibrosis:

Phase III (first-line therapy) (LIMBER-313)

Myelofibrosis:

Phase III (suboptimal responders to ruxolitinib) (LIMBER-304)

ruxolitinib + INCB57643

(JAK1/JAK2 + BET)

Myelofibrosis:

Phase II in preparation

ruxolitinib + INCB00928

(JAK1/JAK2 + ALK2)

Myelofibrosis:

Phase II in preparation

itacitinib (JAK1)

Myelofibrosis:

Phase II (low platelets)

ruxolitinib + CK0804 2

(JAK1/JAK2 + CB-Tregs)

Myelofibrosis:

PoC in preparation

Phase II (L-MIND);

Phase III (B-MIND);

MAA and NDS under review

Phase Ib (firstMIND);

Phase III (frontMIND) in preparation

r/r follicular & marginal zone lymphomas:

Phase III (inMIND)

r/r B-cell malignancies:

PoC with parsaclisib (PI3Kδ) (topMIND) in preparation

r/r B-cell malignancies:

PoC with lenalidomide and plamotamab in preparation 4

Phase II (FIGHT-202), Phase III (FIGHT-302)

MAA, NDS and J-NDA under review

Phase II (FIGHT-203)

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Phase II (FIGHT-207)

tafasitamab (CD19) 2

Phase II (L-MIND);

Phase III (B-MIND);

MAA under review

Phase Ib (First-MIND);

Phase III (Front-MIND) in preparation

r/r follicular lymphoma:

Phase III in preparation

r/r B-cell malignancies:

PoC with parsaclisib (PI3Kδ) in preparation

parsaclisib (PI3Kδ)

r/r follicular lymphoma:

Phase II (CITADEL-203)

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Phase II (CITADEL-205)

retifanlimab (PD-1) 3

MSI-high endometrial cancer:

r/r follicular or marginal zone lymphoma:

Phase III (CITADEL-302) in preparation

1L mantle cell lymphoma:

Phase III (CITADEL-310) in preparation

Phase II (POD1UM-202);

Phase II (POD1UM-204) in preparation

Phase III (PODIUM-303);

BLA under Priority Review;

MAA under review

MSI-high endometrial cancer:

Phase II (POD1UM-101, POD1UM-204)

Merkel cell carcinoma:

Phase II (POD1UM-201)

Phase II (POD1UM-202);

Phase III (PODIUM-303) open for recruitment

Phase III (POD1UM-304) in preparation

Phase III (POD1UM-304)

Clinical development of ruxolitinib in GVHD conducted in collaboration with Novartis.

Development collaboration with Cellenkos, Inc.

tafasitamab development in collaboration with MorphoSys.

Clinical collaboration with MorphoSys and Xencor, Inc.

to investigate the combination of tafasitamab plus lenalidomide in combination with Xencor’s CD20xCD3 XmAb bispecific antibody, plamotamab.

retifanlimab licensed from MacroGenics.

Earlier-Stage Programs

We also have a number of other earlier-stage clinical programs, as detailed in the table below.

Earlier-Stage Development Programs in Hematology and Oncology

We also have a number of other earlier-stage clinical programs in hematology and oncology, as detailed in the table below.

We intend to describe these programs more fully if we obtain clinical proof-of-concept and establish that a program warrants further development in a specific indication or group of indications.

Small molecules

INCB01158 (ARG) 1 , INCB81776 (AXL/MER), epacadostat (IDO1),

INCB86550 (PD-L1)

INCB01158 (ARG) 1 , INCB81776 (AXL/MER), epacadostat (IDO1), INCB86550 (PD-L1), INCB106385 (A 2A /A 2B )

Monoclonal antibodies 2

INCAGN1876 (GITR), INCAGN2385 (LAG-3), INCAGN1949 (OX40),

INCAGN2390 (TIM-3)

INCAGN1876 (GITR), INCAGN2385 (LAG-3), INCAGN1949 (OX40), INCAGN2390 (TIM-3), INCA00186 (CD73)

Bispecific antibodies

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MCLA-145 development in collaboration with Merus N.V.

Clinical Programs in Inflammation and AutoImmunity (IAI)

Incyte Dermatology has been established as a new franchise in the U.S., which will include dedicated teams for the development and commercialization of our dermatology portfolio.

In April 2020, safety and efficacy data from the two Phase III trials in the TRuE-AD program evaluating ruxolitinib cream in mild-to-moderate atopic dermatitis were presented at the Revolutionizing Atopic Dermatitis (RAD)

virtual symposium;

Inflammation and AutoImmunity (IAI)

We do not yet have any approved products in IAI.

In anticipation of the potential FDA approval of our most advanced program, ruxolitinib cream for use in mild-to-moderate atopic dermatitis (AD), we recently established Incyte Dermatology as a new commercial franchise in the United States.

Clinical Programs in Dermatology

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 atopic dermatitis and vitiligo.

In April 2020, safety and efficacy data from the two Phase III trials in the TRuE-AD program evaluating ruxolitinib cream in mild-to-moderate atopic dermatitis (AD) were presented at the Revolutionizing Atopic Dermatitis (RAD) virtual symposium;

both trials met their primary endpoints.

The 44-week long-term safety and efficacy portion of both the TRuE-AD1 and TRuE-AD2 trials are ongoing.

In September 2020, we purchased a priority review voucher from a third party, which had received it through the FDA’s Rare Pediatric Disease Priority Review Voucher Program.

The priority review voucher entitles the holder to designate a human drug application for priority review.

In September 2020, we notified the FDA that we intend to use the priority review voucher in connection with our submission seeking FDA approval of ruxolitinib cream for the treatment of atopic dermatitis.

Atopic dermatitis (AD) is a skin disorder that causes long term inflammation of the skin resulting in itchy, red, swollen and cracked skin.

The 44-week long-term safety and efficacy portion of both the TRuE-AD1 and TRuE-AD2 trials have been completed.

Additional pooled analysis from the TRuE-AD program were presented at the American Academy of Dermatology (AAD) in April 2021, with results demonstrating ruxolitinib cream’s safety and efficacy across various patient subgroups.

In September 2020, we purchased a priority review voucher (PRV) from a third party, with the intent to use it in connection with our submission seeking FDA approval of ruxolitinib cream for the treatment of mild-to-moderate AD.

In February 2021, we announced that the NDA seeking approval for ruxolitinib cream as a treatment for patients with mild-to-moderate AD was accepted for Priority Review by the FDA.

The Prescription Drug User Fee Act (PDUFA) action date is June 21, 2021.

AD is a skin disorder that causes long term inflammation of the skin resulting in itchy, red, swollen and cracked skin.

Onset can occur at any age, but is more common in infants and children.

In the United States, we estimate that there are approximately 10 million diagnosed and treated adolescent and adult patients with mild to moderate AD.

In the United States, we estimate that there are approximately 10 million diagnosed adolescent and adult patients with AD.

In June 2019, primary endpoint data after 6 months of therapy from the Phase II trial of ruxolitinib cream in patients with vitiligo showed a significant benefit over vehicle control, and a global, pivotal Phase III program was initiated in September 2019.

In October 2019, updated data from the Phase II trial showed, after 12 months of therapy, additional improvement in the repigmentation of vitiligo lesions.

In April 2021, updated 104-week data from the Phase II trial were presented at AAD, with results showing continued efficacy in patients treated with ruxolitinib cream through 104 weeks, with a longer duration of treatment being associated with greater levels of repigmentation.

Vitiligo is a long-term skin condition characterized by patches of the skin losing their pigment.

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There are no FDA approved treatments for repigmentation of vitiligo lesions.

INCB54707 is a JAK1 selective inhibitor undergoing evaluation in patients with hidradenitis suppurativa (HS), a chronic skin condition where lesions develop as a result of inflammation and infection of the sweat glands.

In October 2020, initial results from the clinical program were presented and a randomized Phase IIb trial of INCB54707 is now underway in patients with HS.

A Phase II trial of parsaclisib in patients with autoimmune hemolytic anemia (AIHA), a rare red blood cell disorder, is also ongoing.

We are also developing INCB54707, which is an oral small molecule selective JAK1 inhibitor.

INCB54707 is undergoing evaluation in patients with hidradenitis suppurativa (HS), a chronic skin condition where lesions develop as a result of inflammation and infection of the sweat glands.

In October 2020, initial results from the clinical program were presented and a randomized Phase IIb trial of INCB54707 is underway in patients with HS.

In March 2021, we initiated a Phase II trial evaluating INCB54707 in patients with vitiligo.

Clinical Programs in Other IAI

A Phase II trial of parsaclisib in patients with autoimmune hemolytic anemia (AIHA), a rare red blood cell disorder, is ongoing.

The FDA has granted orphan drug designation to parsaclisib as a treatment for patients with AIHA.

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Phase III (TRuE-AD1, TRuE-AD2;

primary endpoints met)

primary endpoint met);

NDA under Priority Review

Phase III (TRuE-V1, TRuE-V2;

recruitment complete in both trials)

INCB54707 (JAK1)

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Novartis’ rights for ruxolitinib outside of the United States under our Collaboration and License Agreement with Novartis do not include topical administration.

Partnered Programs

Collaborative Partnered Programs

As described below under “—License Agreements and Business Relationships,” we are eligible for milestone payments and royalties on certain products that we licensed to third parties.

These include OLUMIANT (baricitinib), which is licensed to our collaborative partner Eli Lilly and Company, and JAKAVI (ruxolitinib) and TABRECTA (capmatinib), which are licensed to Novartis.

We have a second JAK1 and JAK2 inhibitor, baricitinib, which is subject to our collaboration agreement with Lilly, in which Lilly received exclusive worldwide development and commercialization rights to the compound for inflammatory and autoimmune diseases.

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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.

An sNDA for baricitinib has been submitted by Lilly for the treatment of patients with 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 atopic dermatitis by three months to allow time for additional data analyses.

In January 2020, Lilly announced that baricitinib had been submitted for regulatory review in Europe as a treatment for patients with moderate-to-severe AD.

In October 2020, Lilly announced that the European Commission approved baricitinib as OLUMIANT for the treatment of moderate-to-severe AD in adult patients who are candidates for systemic therapy.

In December 2020, baricitinib was approved by the MHLW for the treatment of patients with moderate-to-severe AD.

Systemic Lupus Erythematosus.

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In addition to affecting the skin and joints, it can affect other organs in the body such as the kidneys, the tissue lining the lungs and heart, and the brain.

Lilly has conducted a Phase II trial to evaluate the safety and efficacy of

baricitinib in patients with SLE.

Lilly has conducted a Phase II trial to evaluate the safety and efficacy of baricitinib in patients with SLE.

Baricitinib’s activity profile suggests that it inhibits cytokines implicated in SLE such as type I interferon (IFN), type II IFN-γ, IL-6, and IL-23 as well as other cytokines that may have a role in SLE, including granulocyte macrophage colony stimulating factor (GM-CSF) and IL-12.

The potential impact of baricitinib on the IFN pathway is highly relevant to SLE, as clinical and preclinical studies have established that this pathway is involved in the pathogenesis of SLE.

Lilly is currently running a Phase III trial of baricitinib in patients with SLE.

Lilly is currently running two Phase III trials of baricitinib in patients with SLE, BRAVE I and BRAVE II.

Alopecia Areata .

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In March 2020, Lilly announced that baricitinib received Breakthrough Therapy designation for the treatment of alopecia areata, based on the positive Phase II results of Lilly’s adaptive Phase II/III study BRAVE-AA1.

The Phase III portion of BRAVE-AA1 is ongoing, as is a second Phase III study, BRAVE-AA2, in adults with severe or very severe alopecia areata.

In March 2021, we and Lilly announced positive results from BRAVE-AA2, the Phase III trial evaluating the efficacy and safety of once-daily baricitinib in adults with severe alopecia areata.

In April 2021, we and Lilly announced positive results from the Phase III portion of BRAVE-AA1.

The two studies showed statistically significant improvement in scalp hair regrowth across both baricitinib dosing groups when compared to placebo.

Capmatinib is a potent and highly selective MET inhibitor.

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Phase III (BREEZE-AD);

approved in EU

Systemic lupus erythematosus:

approved in European Union and Japan;

sNDA under review

Severe alopecia areata:

Phase III (BRAVE-AA1, BRAVE-AA2)

Systemic lupus erythematosus:

Phase III (BRAVE I, BRAVE II)

capmatinib (MET) 2

NSCLC (with MET exon 14 skipping mutations):

FDA and MHLW approved

approved in United States and Japan

baricitinib licensed to Lilly.

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Below is a brief description of our significant business relationships and collaborations and related license agreements that expand our pipeline and provide us with certain rights to existing and potential new products and technologies.

Additional information regarding our collaboration agreements, including their financial and accounting impact on our business and results of operations, can be found in Note 9 of notes to our condensed consolidated financial statements.

Out-License Agreements

In November 2009, we entered into a Collaboration and License Agreement with Novartis.

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We retained options to co-develop and to co-promote capmatinib in the United States.

Under this agreement, we received an upfront payment and immediate milestone payment totaling $210.0 million and were initially eligible to receive additional payments of up to approximately $1.2 billion if defined development, regulatory and sales milestones are achieved.

We are also eligible to receive tiered, double-digit royalties ranging from the upper-teens to the mid-twenties percent on future ruxolitinib net sales outside of the United States, and tiered, worldwide royalties on future capmatinib net sales that range from 12% to 14%.

In addition, Novartis has received reimbursement and pricing approval for ruxolitinib in a specified number of countries, and we are now obligated to pay to Novartis tiered royalties in the low single-digits on future ruxolitinib net sales within the United States.

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.

In April 2016, we amended this agreement to provide that Novartis has exclusive research, development and commercialization rights outside of the United States to ruxolitinib (excluding topical formulations) in the GVHD field.

Under this amendment, we received a $5.0 million payment in exchange for the development and commercialization rights to ruxolitinib in GVHD outside of the United States and became eligible to receive up to $75.0 million of additional potential development and regulatory milestones relating to GVHD.

In May 2020, we recognized a $25.0 million development milestone and a $45.0 million regulatory milestone for the FDA approval of capmatinib as TABRECTA.

In June 2020, we recognized a $20.0 million regulatory milestone for the MHLW approval of TABRECTA.

Exclusive of the upfront payment of $150.0 million received in 2009 and the

immediate milestone of $60.0 million earned in 2010, we have recognized and received, in the aggregate, $157.0 million for the achievement of development milestones, $280.0 million for the achievement of regulatory milestones and $120.0 million for the achievement of sales milestones through September 30, 2020.

The Novartis agreement will continue on a program-by-program basis until Novartis has no royalty payment obligations with respect to such program or, if earlier, the termination of the agreement or any program in accordance with the terms of the agreement.

Royalties are payable by Novartis on a product-by-product and country-by-country basis until the latest to occur of (i) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country, (ii) the expiration of regulatory exclusivity for the licensed product in such country and (iii) a specified period from first commercial sale in such country of the licensed product by Novartis or its affiliates or sublicensees.

The agreement may be terminated in its entirety or on a program-by-program basis by Novartis for convenience.

The agreement may also be terminated by either party under certain other circumstances, including material breach.

In December 2009, we entered into a License, Development and Commercialization Agreement with Lilly.

Under the terms of the agreement, Lilly received exclusive worldwide development and commercialization rights to baricitinib and certain back up compounds for inflammatory and autoimmune diseases.

We received an initial payment of $90.0 million, and were initially eligible to receive additional payments of up to $665.0 million based on the achievement of defined development, regulatory and sales milestones.

We retained options to co-develop our JAK1/JAK2 inhibitors with Lilly on a compound-by-compound and indication-by-indication basis.

Lilly is responsible for all costs relating to the development and commercialization of the compounds unless we elect to co-develop any compounds or indications.

If we elect to co-develop any compounds and/or indications, we would be responsible for funding 30% of the associated future global development costs from the initiation of a Phase IIb trial through regulatory approval, including post-launch studies required by a regulatory authority.

We would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging up to the high twenties on potential future global net sales for compounds and/or indications that we elect to co-develop.

For indications that we elect not to co-develop, we would receive tiered, double-digit royalty payments on future global net sales with rates ranging up to 20% if the product is successfully commercialized.

If we have started co-development funding for any indication, we can at any time opt out and stop future co-development cost sharing.

If we elect to do this, we would still be eligible for our base royalties plus an incremental pro-rated royalty commensurate with our contribution to the total co-development cost for those indications for which we co-funded.

We previously had retained an option to co-promote products in the United States but, in March 2016, we waived our co-promotion option as part of an amendment to the agreement.

In July 2010, we elected to co-develop baricitinib with Lilly in rheumatoid arthritis, and subsequently in several additional indications, and became responsible for funding 30% of the associated global development costs for such indications from the initiation of the Phase IIb trial through regulatory approval, including post-launch studies required by a regulatory authority.

In April 2019, we elected to end additional co-funding of the development of baricitinib in all indications, effective as of January 1, 2019.

Pursuant to the terms of the Lilly agreement, we will continue to receive base tiered royalties on global net sales of OLUMIANT in all indications, as well as pro-rated incremental royalties, as described above.

In March 2016, we entered into an amendment to the agreement with Lilly that allows us to engage in the development and commercialization of ruxolitinib in the GVHD field.

Upon execution of the amendment, we paid Lilly an upfront payment of $35.0 million and Lilly is 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 May 2020, we amended our agreement with Lilly to enable Lilly to commercialize baricitinib for the treatment of COVID-19.

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.

Exclusive of the upfront payment of $90.0 million received in 2009, we have recognized and received, in the aggregate, $149.0 million for the achievement of development milestones and $235.0 million for the achievement of regulatory milestones through September 30, 2020.

The Lilly agreement will continue until Lilly no longer has any royalty payment obligations or, if earlier, the termination of the agreement in accordance with its terms.

Royalties are payable by Lilly on a product-by-product and country-by-country basis until the latest to occur of (i) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country, (ii) the expiration of regulatory exclusivity for the licensed product in such country and (iii) a specified period from first commercial sale in such country of the licensed product by Lilly or its affiliates or sublicensees.

The agreement may be terminated by Lilly for convenience, and may also be terminated under certain other circumstances, including material breach.

In December 2018, we entered into a research collaboration and licensing agreement with Innovent Biologics, Inc.

Under the terms of this agreement, Innovent received exclusive development and commercialization rights to pemigatinib and our clinical-stage product candidates itacitinib and parsaclisib in hematology and oncology indications in mainland China, Hong Kong, Macau and Taiwan.

In July 2019, we entered into a collaboration and license agreement with a subsidiary of Zai Lab Limited.

Under the terms of this agreement, Zai Lab received development and exclusive commercialization rights to INCMGA0012 in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

We retained an option to assist in the promotion of INCMGA0012 in Zai Lab’s licensed territories.

In-License Agreements

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

1 unchanged sentence

Under this agreement, the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using Agenus’ antibody discovery platforms.

In February 2017, we and Agenus amended this agreement.

Under the terms of this agreement, as amended, we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against GITR, OX40, LAG-3 and TIM-3.

In addition to the initial four program targets, we and Agenus have the option to jointly nominate and pursue additional targets within the framework of the collaboration, and in November 2015, three more targets were added.

Targets may be designated profit-share programs, where all costs and profits are shared equally by us and Agenus, or royalty-bearing programs, where we are responsible for all costs associated with discovery, preclinical, clinical development and commercialization activities.

The programs relating to GITR and OX40 and two of the undisclosed targets were profit-share programs until February 2017, while the other targets currently under collaboration are royalty-bearing programs.

The February 2017 amendment converted the programs relating to GITR and OX40 to royalty-bearing programs and removed from the collaboration the profit-share programs relating to the two undisclosed targets, with one reverting to us and one reverting to Agenus.

Should any of those removed programs be successfully developed by a party, the other party will be eligible to receive the same milestone payments as the royalty-bearing programs and royalties at a 15% rate on global net sales.

There are currently no profit-share programs.

For each royalty-bearing product other than GITR and OX40, Agenus will be eligible to receive tiered royalties on global net sales ranging from 6% to 12%.

For GITR and OX40, Agenus will be eligible to receive 15% royalties on global net sales.

Under the February 2017 amendment, we paid Agenus $20.0 million in accelerated milestones relating to the clinical development of the GITR and OX40 programs.

Agenus was initially eligible to receive up to an additional $510.0 million in future contingent development, regulatory and commercialization milestones across all programs in the collaboration.

As of September 30, 2020, we have paid Agenus an aggregate of $10.0 million in development milestones.

The agreement may be terminated by us for convenience upon 12 months’ notice and may also be terminated under certain other circumstances, including material breach.

Under the terms of this agreement, as amended in February 2017, we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against GITR, OX40, LAG-3 and TIM-3.

Takeda (ARIAD)

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ARIAD was subsequently acquired by Takeda Pharmaceutical Company Limited in 2017.

As such, Takeda will be eligible to receive from us tiered royalties on net sales of ICLUSIG in our territory and up to $135.0 million in potential future oncology development and regulatory approval milestone payments, together with additional milestone payments for non-oncology indications, if approved, in our territory.

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

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Merus retained exclusive development and commercialization rights in the United States to MCLA-145.

Each party will share equally the costs of mutually agreed global development activities for MCLA-145, and fund itself any independent development activities in its territory.

Merus will be responsible for commercializing MCLA-145 in the United States and we will be responsible for commercializing it outside of the United States.

In addition to receiving rights to MCLA-145 outside of the United States, we received worldwide exclusive development and commercialization rights to up to ten additional programs.

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

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

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

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

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

In February 2017, we paid Merus an upfront non-refundable payment of $120.0 million.

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

For each program as to which Merus exercises its option to co-fund development, Merus will be eligible to receive a 50% share of profits (or sustain 50% of any losses) in the United States and be eligible to receive tiered royalties ranging from 6% to 10% of net sales of products outside of the United States.

If Merus opts to cease co-funding a program as to which it exercised its co-development option, then Merus will no longer receive a share of profits in the United States but will be eligible to receive the same milestones from the co-funding termination date and the same tiered royalties described above with respect to programs where Merus does not have a right to co-fund development and, depending on the stage at which Merus chose to cease co-funding development costs, Merus will be eligible to receive additional royalties ranging up to 4% of net sales in the United States.

For MCLA-145, we and Merus will each be eligible to receive tiered royalties on net sales in the other party’s territory at rates ranging from 6% to 10%.

The Merus agreement will continue on a program-by-program basis until we have no royalty payment obligations with respect to such program or, if earlier, the termination of the agreement or any program in accordance with the terms of the agreement.

The agreement may be terminated in its entirety or on a program-by-program basis by us for convenience.

The agreement may also be terminated by either party under certain other circumstances, including material breach, as set forth in the agreement.

If the agreement is terminated with respect to one or more programs, all rights in the terminated programs revert to Merus, subject to payment to us of a reverse royalty of up to 4% on sales of future products, if Merus elects to pursue development and commercialization of products arising from the terminated programs.

In January 2017, we entered into a Collaboration and License Agreement with Calithera Biosciences, Inc.

Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase inhibitors, including INCB01158 (CB-1158), which is currently in Phase I clinical trials, for hematology and oncology indications.

We have agreed to co-fund 70% of the global development costs for the development of the licensed products for hematology and oncology indications.

Calithera will have the right to conduct certain clinical development under the

collaboration, including combination studies of a licensed product with a proprietary compound of Calithera.

We will be entitled to 60% of the profits and losses from net sales of licensed product in the United States, and Calithera will have the right to co-detail licensed products in the United States, and we have agreed to pay Calithera tiered royalties ranging from the low to mid-double digits on net sales of licensed products outside the United States.

Calithera retains rights to certain arginase inhibitors that are not part of the collaboration for specific orphan indications outside of hematology and oncology, subject to our rights to negotiate a license for any such programs under specified circumstances if Calithera elects to out-license them.

In January 2017, we paid Calithera an upfront license fee of $45.0 million and have agreed to pay potential development, regulatory and sales milestone payments of over $430.0 million if the profit share is in effect, or $750.0 million if the profit share terminates.

In August 2020, Calithera delivered notice of its decision to opt out of its co-funding obligation, effective on September 30, 2020.

As a result, the U.S.

profit sharing will no longer be in effect, we will be responsible for funding all of the development costs of INCB01158 and any other licensed products, and the agreement provides that we will pay Calithera tiered royalties ranging from the low to mid-double digits on net sales of licensed products both in the United States and outside the United States and additional royalties to reimburse Calithera for previously incurred development costs.

In addition, the total remaining potential development, regulatory and sales milestone payments will be $738.0 million and Calithera will have no further rights to research, develop or co-detail INCB001158 and we will have the right to take over the conduct of all activities related to the research, development and commercialization of INCB001158 for all indications in the hematology/oncology field.

The Calithera agreement will continue on a product-by-product and country-by-country basis for so long as we are developing or commercializing products in the United States (if the parties are sharing profits in the United States) and until we have no further royalty payment obligations, unless earlier terminated according to the terms of the agreement.

The agreement may be terminated in its entirety or on a product-by-product and/or a country-by-country basis by us for convenience.

The agreement may also be terminated by us for Calithera’s uncured material breach, by Calithera for our uncured material breach and by either party for bankruptcy or patent challenge.

If the agreement is terminated early with respect to one or more products or countries, all rights in the terminated products and countries revert to Calithera.

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

Under this agreement, we received exclusive development and commercialization rights worldwide to MacroGenics’ INCMGA0012, an investigational monoclonal antibody that inhibits PD-1.

Except as set forth in the succeeding sentence, we will have sole authority over and bear all costs and expenses in connection with the development and commercialization of INCMGA0012 in all indications, whether as a monotherapy or as part of a combination regimen.

Under this agreement, we received exclusive development and commercialization rights worldwide to MacroGenics’ INCMGA0012,

an investigational monoclonal antibody that inhibits PD-1.

MacroGenics has retained the right to develop and commercialize, at its cost and expense, its pipeline assets in combination with INCMGA0012.

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

As of September 30, 2020, we have paid MacroGenics an upfront payment of $150.0 million and milestones totaling $30.0 million.

MacroGenics will be eligible to receive up to an additional $390.0 million in future contingent development and regulatory milestones, and up to $330.0 million in commercial milestones as well as tiered royalties ranging from 15% to 24% of global net sales.

The MacroGenics agreement will continue until we are no longer commercializing, developing or manufacturing INCMGA0012 or, if earlier, the termination of the agreement in accordance with its terms.

The agreement may be terminated in its entirety or on a licensed product by licensed product basis by us for convenience.

The agreement may also be terminated by either party under certain other circumstances, including material breach, as set forth in the agreement.

In January 2018, we entered into a target discovery, research collaboration and option agreement with Syros Pharmaceuticals, Inc.

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

We paid Syros $2.5 million in cash for access to proprietary technology and $7.5 million in cash for research and development services.

We have agreed to pay Syros up to $54.0 million in target selection and option exercise fees should we decide to exercise all of our options under the agreement.

For products resulting from the collaboration against each of the seven selected and validated targets, we have agreed to pay up to $50.0 million in potential development and regulatory milestones and up to $65.0 million in potential sales milestones.

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

In December 2018, we entered into a research collaboration and licensing agreement with Innovent Biologics, Inc.

In January 2019, we recognized an upfront payment under this agreement of $40.0 million upon our transfer of the intellectual property related to the clinical-stage product candidates to Innovent.

In addition, we were initially eligible to receive $20.0 million in connection with the first related IND filing in China, up to an additional $129.0 million in potential development and regulatory milestones, and up to $202.5 million in potential sales milestones.

We are also eligible to receive tiered royalties from the high-teens to the low-twenties on future sales of products resulting from the collaboration.

We retain an option to assist in the promotion of the three product candidates in the Innovent territories.

In June 2019, we recognized the $20.0 million milestone for the first related IND filing in China.

In April 2020, we recognized a $5.0 million milestone for the FDA approval of pemigatinib as PEMAZYRE.

In July 2019, we entered into a collaboration and license agreement with a subsidiary of Zai Lab Limited.

Under the terms of this agreement, Zai Lab received development and exclusive commercialization rights to INCMGA0012 in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

We recognized an upfront payment under this agreement of $17.5 million in August 2019 upon our transfer of technology related to the licensed product candidate to Zai Lab, and are eligible to receive an additional $60.0 million in potential development, regulatory and sales milestones, as well as tiered royalties from the low to mid-twenties.

We also retain an option to assist in the promotion of INCMGA0012 in Zai Lab’s licensed territories.

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, covering the worldwide development and commercialization of MOR208 (tafasitamab), an investigational Fc engineered monoclonal antibody directed against the target molecule CD19.

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

Our agreement with MorphoSys became effective in March 2020 after clearance by the German and Austrian antitrust authorities and expiration of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976.

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.

In March 2020, we paid MorphoSys an upfront non-refundable payment of $750.0 million.

MorphoSys is eligible to receive up to $740.0 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.

In December 2019, coronavirus disease of 2019, or COVID-19, was first reported in Wuhan, China.

In March 2020, the World Health Organization declared COVID-19 a pandemic (“the COVID-19 Pandemic”).

We and our collaboration partners Lilly and Novartis initiated a number of clinical trials to address COVID-19.

We sponsored this collaborative study in the United States and our collaboration partner Novartis International Pharmaceutical Ltd.

sponsored the study outside of the United States.

In December 2020, we announced initial results from RUXCOVID, where treatment with ruxolitinib plus SoC did not prevent complications compared to SoC treatment alone in patients with COVID-19 associated cytokine storm.

The RUXCOVID study has been completed and the data will be further analyzed to determine any potential impact on other studies of ruxolitinib in patients with COVID-19, including our Expanded Access Program in the United States, which allows eligible patients with severe COVID-19 associated cytokine storm to receive ruxolitinib.

In March 2021, results from a second Phase III clinical trial to evaluate the efficacy and safety of ruxolitinib plus SoC, compared to SoC therapy alone, in COVID-19 patients on mechanical ventilation and who have acute respiratory distress syndrome (ARDS), a type of respiratory failure characterized by rapid onset of widespread inflammation in the lungs were announced.

Ruxolitinib failed to reduce mortality due to any cause through Day 29 although in the U.S.

study population (91% of total study patients), there was a clinically and statistically significant improvement in mortality in each of the 5mg and 15mg ruxolitinib arms.

In April 2020, Lilly announced that it has entered into an agreement with the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, to study baricitinib as an arm in NIAID's Adaptive COVID-19 Treatment Trial (ACTT-2).

In September 2020, we and Lilly announced initial results from ACTT-2, where baricitinib in combination with remdesivir reduced the time to recovery in comparison with remdesivir alone.

In November 2020, we and Lilly announced that the FDA issued an Emergency Use Authorization (EUA) for the distribution and emergency use of baricitinib to be used in combination with remdesivir in hospitalized adult and pediatric patients two years of age or older with suspected or laboratory confirmed COVID-19 who require supplemental oxygen, invasive mechanical ventilation, or extracorporeal membrane oxygenation.

In December 2020, we and Lilly announced that data from ACTT-2 supportive of the EUA were published in the New England Journal of Medicine.

In April 2021, we and Lilly announced that the primary endpoint was not met in COV-BARRIER, the Phase III randomized, double-blind, placebo–controlled study to evaluate the efficacy and safety of baricitinib in hospitalized adults not on mechanical ventilation and who have COVID-19.

There was, however, a 38% reduction in mortality by Day 28 in patients treated with baricitinib in addition to SoC.

Critical Accounting Policies and Significant Estimates

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Revenue Recognition.

We recognize revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer.

Control, in this instance, may mean the ability to prevent other entities from directing the use of, and receiving benefit from, a good or service.

The standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time or satisfy the performance obligation at a point in time through analysis of the following criteria:

(i) the entity has a present right to payment, (ii) the customer has legal title, (iii) the customer has physical possession, (iv) the customer has the significant risks and rewards of ownership and (v) the customer has accepted the asset.

We assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer.

We recognize revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

We apply the following five-step model in order to determine this amount:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations;

and (v) recognition of revenue when (or as) the Company satisfies each performance obligation, which for the Company is generally at a point in time.

We also assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer.

Product Revenues

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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 Medicare Part D coverage gap reimbursements in the U.S.

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 U.S.

and mandated discounts in Europe in markets where government-sponsored healthcare systems are the primary

payers for healthcare.

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.

Our estimates for expected utilization of rebates are based on data received from our customers.

Rebates are 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’ unpaid rebates.

Rebates are 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’ unpaid rebates.

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

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Milestone and Contract Revenues

At the inception of a contract, the transaction price reflects the amount of consideration we expect to be entitled to in exchange for transferring promised goods or services to our collaborator.

At the inception of a contract, we determine the transaction price, in addition to any upfront payment, by estimating the amount of variable consideration, including milestone payments, at the outset of the contract utilizing the most likely amount method.

Our contractual milestones typically relate to the achievement of pre-specified development, regulatory and commercialization events outside of our control, such as regulatory approval of a compound, first patient dosing or achievement of sales-based thresholds.

We include milestones in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the milestone is subsequently resolved.

Given the high level of uncertainty of achievement, variable consideration associated with milestones are fully constrained until confirmation of the satisfaction or completion of the milestone by the third-party.

We review our estimate of the transaction price each period, and make revisions to such estimates as necessary.

Milestone and contract revenues from collaborative agreements with multiple performance obligations is determined based upon assessment of each distinct promised good or service’s estimated fair value and recognized based upon the completion of the promised good or service to our collaborator.

Our license agreements often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and commercialization events outside of our control, such as regulatory approval of a compound, first patient dosing or achievement of sales-based thresholds.

As such, milestones associated with our collaborations involve a substantial degree of uncertainty and risk that they may never be received.

Given the uncertainty associated with achieving these milestones, constraints on the allocated consideration are assessed each reporting period.

Revenues are recognized when achievement is probable, which may not be until achieved.

Stock Compensation.

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The stock compensation process requires significant judgment and 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.

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.

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.

The fair value of RSUs that are subject to cliff vesting are recognized as compensation expense over the requisite service period using the straight-line attribution method, and the fair value of RSUs that are subject to graded vesting are recognized as compensation expense over the requisite service period using the accelerated attribution method.

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Any interest and penalties on uncertain tax positions are included within the tax provision.

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

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.

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The fair value of the acquisition-related contingent consideration is remeasured each reporting period, with changes in fair value recorded in the consolidated statements of operations.

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

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

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

While we use the best available information to prepare our projected ICLUSIG revenues and discount rate assumptions, actual ICLUSIG revenues and/or market conditions could

differ significantly.

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

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” This guidance applies to all entities and impacts how entities account for credit losses for financial assets measured at amortized cost and available for sale debt securities.

ASU 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.

An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate expected credit losses over the lifetime of the asset.

For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than an other-than-temporary impairment that reduces the cost basis of the investment.

Further, an entity will recognize any improvements in estimated credit losses on its available-for-sale debt securities immediately in earnings.

Upon adoption, we assessed each financial asset measured at amortized cost and each available-for-sale debt security held for the impact of the guidance as of January 1, 2020 and noted an insignificant impact due to the minimal credit risk associated with our financial assets subject to ASC 326.

As such, it was concluded that a reserve for credit losses was de minimis on the adoption date.

Financial assets will continue to be assessed on a quarterly basis in future periods.

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which eliminates the required disclosure of the amount of and reason for transfers between Level 1 and Level 2 of the fair value hierarchy.

The guidance also eliminates the required disclosure of the entity’s valuation process for Level 3 fair value measurements, however public entities are required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

This guidance is effective for fiscal years beginning after December 15, 2019.

We adopted this guidance for the period beginning January 1, 2020 and enhanced our disclosures in Note 4 to the condensed consolidated financial statements to comply with the standard.

In August 2018, the FASB issued ASU No.

2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General,” an update to Subtopic ASC 715-20.

The guidance amended year-end disclosure requirements related to defined benefit pension plans, and does not affect interim disclosures.

The guidance is effective for fiscal years ending after December 15, 2020 and is permitted for early adoption.

The standard is to be applied on a retrospective basis.

Incyte sponsors defined benefit plans for employees located in Europe.

We are currently analyzing the impact of ASU No.

2018-14 on the condensed consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15, “Intangibles – Goodwill and Other – Internal-Use Software,” an update to Subtopic ASC 350-40.

The guidance directs accounting for service contracts for cloud computing arrangements to follow guidance within ASC 350-40 to determine capitalization of implementation costs.

The guidance is effective for fiscal years beginning after December 15, 2019 and may be applied on either a retrospective or prospective basis.

We adopted this guidance for the period beginning January 1, 2020 on a prospective basis.

New contracts for development of internal-use software were assessed and no qualifying contracts were identified during the period.

We will continue to assess contracts and will disclose material, qualifying contracts if identified in future periods.

In November 2018, the FASB issued ASU No.

2018-18, “Collaborative Arrangements (Topic 808):

Clarifying the Interaction Between Topic 808 and Topic 606.” The guidance clarifies the interactions between Topic 808 and Topic

606, including clarifications on revenue recognition, unit of account, and reporting disclosure requirements.

The guidance is effective for fiscal years beginning after December 15, 2019.

We adopted this guidance for the period beginning January 1, 2020 retrospectively to the date of our initial application of ASC 606, and noted that in assessment of our collaborative agreements, there was no material financial statement impact.

Our collaborative arrangements and their associated accounting conclusions are described in detail within Note 9 to the condensed consolidated financial statements.

In December 2019, the FASB issued ASU No.

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This guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein.

Early adoption is permitted for any annual periods for which financial statements have not been issued and interim periods therein.

We are currently analyzing the impact of ASU No.

2019-12 on the condensed consolidated financial statements.

We adopted this guidance for the period beginning January 1, 2021.

Upon adoption, ASU No.

2019-12 had an immaterial impact on the condensed consolidated financial statements.

Results of Operations

We recorded net loss of $15.2 million and basic and diluted net loss per share of $0.07 for the three months ended September 30, 2020, as compared to net income of $128.3 million and basic net income per share of $0.60 and diluted net income per share of $0.59 in the corresponding period in 2019.

We recorded net loss of $445.5 million and basic and diluted net loss per share of $2.05 for the nine months ended September 30, 2020, as compared to net income of $335.9 million and basic net income per share of $1.57 and diluted net income per share of $1.55 in the corresponding period in 2019.

We recorded net income of $53.5 million and basic and diluted net income per share of $0.24 for the three months ended March 31, 2021, as compared to net loss of $720.6 million and basic and diluted net loss per share of $3.33 in the corresponding period in 2020.

For the Three Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

JAKAFI revenues, net

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Total product royalty revenues

Milestone and contract revenues

Total revenues

The increase in JAKAFI product revenues for the three months ended September 30, 2020 as compared to the corresponding period in 2019 was comprised of a volume increase of $40.8 million and a price increase of $13.6 million.

The increase in JAKAFI product revenues for the nine months ended September 30, 2020 as compared to the corresponding period in 2019 was comprised of a volume increase of $176.4 million and a price increase of $26.1 million.

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.

The increase in JAKAFI product revenues for the three months ended March 31, 2021 as compared to the corresponding period in 2020 was comprised of a volume decrease of $4.9 million, including the impact of a decline in new patient starts due to the COVID-19 pandemic, and higher patient demand and channel inventory stocking in the prior year comparative period, due to the potential for COVID-19 related supply disruptions, offset by a price increase of $11.1 million.

Additionally, 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.

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

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Discounts and

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Balance at January 1, 2021

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Credits/payments for prior period sales

Balance at September 30, 2020

Balance at March 31, 2021

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

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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 nine months ended September 30, 2020, were derived from a $5.0 million milestone under the Innovent research collaboration and licensing agreement and $90.0 million in milestones under the Novartis collaboration and license agreement.

Our milestone and contract revenues for the nine months ended September 30, 2019, were derived from a $40.0 million upfront payment and a $20.0 million milestone under the Innovent research collaboration and licensing agreement and a $17.5 million upfront payment under the Zai Lab collaboration and license agreement.

Cost of Product Revenues.

For the Three Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

Product costs

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Cost of product revenues includes all JAKAFI, ICLUSIG and PEMAZYRE related product costs, employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial products, low single-digit royalties to Novartis on all sales of JAKAFI in the United States and amortization of our licensed intellectual property rights for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years.

The increase in cost of product revenues for the three and nine months ended September 30, 2020 as compared to the corresponding periods in 2019 was due primarily to increased royalties to Novartis on all JAKAFI sales in the United States.

Operating Expenses.

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For the Three Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

Salary and benefits related

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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 and nine months ended September 30, 2020 as compared to the corresponding periods in 2019 was due primarily to increased development headcount to sustain our development pipeline.

The increase in salary and benefits related expense for the three months ended March 31, 2021 as compared to the corresponding period in 2020 was due primarily to increased development 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 September 30, 2020 as compared to the corresponding period in 2019 was primarily due to milestone achievement of $15.0 million under our collaboration and license agreement with MacroGenics and the cost of purchasing an FDA priority review voucher for $120.0 million, which we intend to use in connection with our submission seeking FDA approval of ruxolitinib cream for the treatment of atopic dermatitis.

In addition, clinical research and outside services expense for the nine months ended September 30, 2020 included upfront consideration of $804.5 million related to our collaborative agreement with MorphoSys contributing to the increase as compared to the corresponding period in 2019.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements and priority review voucher of $141.5 million and $950.5 million, respectively, for the three and nine months ended September 30, 2020.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $0.0 million and $25.3 million, respectively, for the three and nine months ended September 30, 2019.

Research and development expenses for the three and nine months ended September 30, 2020 and 2019 were net of $2.1 million, $7.0 million, $5.3 million and $11.6 million, respectively, of costs reimbursed by our collaborative partners.

The decrease in clinical research and outside services expense for the three months ended March 31, 2021 as compared to the corresponding period in 2020 was primarily due to upfront consideration related to our collaborative agreement with MorphoSys recorded during 2020.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $11.5 million and $805.5 million, respectively, for the three months ended March 31, 2021 and 2020.

Research and development expenses for the three months ended March 31, 2021 and 2020 were net of $3.6 million and $1.7 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 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 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 API, 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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For the Three Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

Salary and benefits related

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Total selling, general and administrative expenses

The increase in salary and benefits related expense for the three and nine months ended September 30, 2020 as compared to the corresponding periods in 2019 was due primarily to increased headcount.

The increase in salary and benefits related expense for the three months ended March 31, 2021 as compared to the corresponding period in 2020 was due primarily to increased headcount.

This increased headcount was due primarily to the ongoing commercialization efforts related to JAKAFI for intermediate or high-risk myelofibrosis, uncontrolled polycythemia vera and GVHD as well as increased headcount related to our European operations.

The increase in other contract services and outside costs for the three months ended March 31, 2021, as compared to the corresponding

period in 2020, was due primarily to expenses related to the establishment of our dermatology commercial organization, expenses related to activities to support the potential launch of ruxolitinib cream for the treatment of atopic dermatitis, expense recognized in connection with a legal reserve, as discussed in Note 15 of notes to our condensed consolidated financial statements, and the timing of certain expenses.

Change in fair value of acquisition-related contingent consideration

Acquisition-related contingent consideration, which consists of our future royalty obligations to 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.

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 three and nine months ended September 30, 2020 was $7.1 million and $19.8 million, respectively, which is recorded in 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 nine months ended September 30, 2019 was $3.3 million and $16.6 million, respectively, which is recorded in change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value for the three and nine months ended September 30, 2020 and 2019 was due primarily to the passage of time as there were no other significant changes in the key assumptions during the periods.

The change in fair value of the acquisition-related contingent consideration for the three months ended March 31, 2021 and 2020 was $5.5 million and $6.6 million, respectively, which is recorded in change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value for the three months ended March 31, 2021 and 2020 was due primarily to the passage of time as there were no other significant changes in the key assumptions during the periods.

Collaboration loss sharing

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

For the three and nine months ended September 30, 2020, our 50% share of the costs for tafasitamab was $15.0 million and $30.4 million, respectively, as recorded in collaboration loss sharing on the condensed consolidated statement of operations.

For the three months ended March 31, 2021 and 2020, our 50% share of the costs for tafasitamab was $10.5 million and $2.1 million, respectively, as recorded in collaboration loss sharing on the condensed consolidated statement of operations.

Other income (expense).

Other income (expense), net.

Other income (expense), net for the three and nine months ended September 30, 2020 was $4.9 million and $18.4 million, respectively.

Other income (expense), net for the three and nine months ended

September 30, 2019 was $12.0 million and $36.3 million, respectively.

The decrease in other income (expense), net for the three and nine months ended September 30, 2020 primarily relates to a decrease in interest income.

Other income (expense), net for the three months ended March 31, 2021 and 2020 was ($1.4) million and $8.7 million, respectively.

The decrease in other income (expense), net primarily relates to lower interest income for the three months ended March 31, 2021.

Interest expense.

Interest expense for the three and nine months ended September 30, 2020 was $0.5 million and $1.7 million, respectively.

Interest expense for the three and nine months ended September 30, 2019 was $0.6 million and $1.2 million, respectively.

Included in interest expense for the three and nine months ended September 30, 2020 was $0.2 million and $0.6 million, respectively, of non-cash charges to amortize the discount on the 2020 Notes and approximately $0.3 million and $0.9 million, respectively, of interest expense on our finance lease liabilities.

Included in interest expense for the three and nine months ended September 30, 2019 was $0.2 million and $0.6 million, respectively, of non-cash charges to amortize the discount on the 2020 Notes and approximately $0.3 million of interest expense on our finance lease liabilities.

Interest expense for the three months ended March 31, 2021 and 2020 was $0.4 million and $0.6 million, respectively.

Included in interest expense for the three months ended March 31, 2020 was $0.2 million of non-cash charges to amortize the discounts on our convertible senior notes due November 2020.

Included in interest expense for the three months ended March 31, 2021 and 2020 was $0.3 million of interest expense on our finance lease liabilities.

Unrealized gain (loss) on long term investments.

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For the Three Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

Total unrealized gain (loss) on long term investments

Total unrealized loss on long term investments

Provision for income taxes.

The provision for income taxes for the three and nine months ended September 30, 2020 and was $11.7 million and $45.2 million, respectively.

The provision for income taxes for the three and nine months ended September 30, 2019 and was $19.7 million and $24.9 million, respectively.

The decrease in tax expense for the three months ended September 30, 2020 was primarily driven by increased tax benefits for stock-based compensation and foreign derived intangible income.

The increase in tax expense for the nine months ended September 30, 2020 was primarily driven by increased federal and state tax liabilities that are not fully sheltered by net operating losses or research and development tax credit carryforwards.

The provision for income taxes for the three months ended March 31, 2021 and 2020 was $15.8 million and $16.6 million, respectively.

Liquidity and Capital Resources

Due to historical net losses, we had an accumulated deficit of $1.9 billion as of September 30, 2020.

Due to historical net losses, we had an accumulated deficit of $1.7 billion as of March 31, 2021.

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

At September 30, 2020, we had available cash, cash equivalents and marketable securities of $1.7 billion.

At March 31, 2021, we had available cash, cash equivalents and marketable securities of $2.0 billion.

Our cash and marketable securities balances are 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 used in operating activities for the nine months ended September 30, 2020 was $231.9 million and net cash provided by operating activities for the nine months ended September 30, 2019 was $579.0 million.

The $810.9 million decrease in cash provided by operating activities was due primarily to cash outflows related to our collaboration and license agreements and changes in working capital.

Net cash provided by operating activities for the three months ended March 31, 2021 was $206.1 million and net cash used in operating activities for the three months ended March 31, 2020 was $683.4 million.

The $889.5 million increase in cash provided by operating activities was due primarily to cash outflows in March 2020 related to our collaboration and license agreement with MorphoSys and changes in working capital.

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

Net cash used by investing activities was $166.3 million for the nine months ended September 30, 2020, which represented purchases of marketable securities of $418.7 million, capital expenditures of $135.9 million and purchases of long term equity investments of $95.5 million, offset in part by the sale of long term investment of $17.3 million and the sale and maturity of marketable securities of

$466.6 million.

Net cash used in investing activities was $57.4 million for the nine months ended September 30, 2019, which represented purchases of marketable securities of $222.2 million and capital expenditures of $48.7 million, offset in part by the sale and maturity of marketable securities of $213.5 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 provided by financing activities was $59.8 million and $16.4 million, respectively, for the nine months ended September 30, 2020 and 2019, primarily representing proceeds from the issuance of common stock under our stock plans, offset in part by cash paid to ARIAD/Takeda for contingent consideration.

The following summarizes our significant contractual obligations as of September 30, 2020 and the effect those obligations are expected to have on our liquidity and cash flow in future periods (in millions):

Contractual Obligations:

Principal on convertible senior debt

Interest on convertible senior debt

Finance lease liabilities

Operating lease liabilities

Other non-cancelable obligations

Total contractual obligations

We have entered into and may in the future seek to license additional rights relating to technologies or drug development candidates in connection with our drug discovery and development programs.

Under these licenses, we may be required to pay upfront fees, milestone payments, and royalties on sales of future products, which are not reflected in the table above.

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

Net cash used in investing activities was $59.8 million for the three months ended March 31, 2021, which represented purchases of marketable securities of $39.3 million, capital expenditures of $48.1 million and purchase of long term equity investment of $8.7 million, offset in part by the sale and maturity of marketable securities of $35.2 million and the sale of long term investment of $1.1 million.

Net cash used in investing activities was $108.6 million for the three months ended March 31, 2020, which represented purchases of marketable securities of $147.4 million, capital expenditures of $39.3 million, and purchase of long term equity investment of $95.5 million, offset in part by the sale and maturity of marketable securities of $173.6 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, capital expenditures and maturities/sales and purchases of marketable securities.

Net cash provided by financing activities was $12.8 million and $2.5 million, respectively, for the three months ended March 31, 2021 and 2020, primarily representing proceeds from the issuance of common stock under our stock plans, offset in part by cash paid to ARIAD/Takeda for contingent consideration.

Our capital expenditures for construction activities and our non-operating contractual operating and finance lease obligations are discussed in Note 7 of notes to our condensed consolidated financial statements.

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

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

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costs for future facility requirements;

our receipt of any milestone or other payments under any collaborative agreements we may enter into, including the agreements with Novartis, Lilly, Innovent and Zai Lab;

and expenditures in connection with strategic relationships and license agreements, including our agreements with Agenus, ARIAD/Takeda, Calithera, Lilly, MacroGenics, MorphoSys, Merus and Syros, strategic equity investments or potential acquisitions.

and expenditures for future strategic equity investments or potential acquisitions.

We have entered into and may in the future seek to license additional rights relating to technologies or drug development candidates in connection with our drug discovery and development programs.

Under these licenses, we may be required to pay upfront fees, milestone payments, and royalties on sales of future products.

These contingent future payments are discussed in detail in Note 9 of notes to our condensed consolidated financial statements.

To the extent we seek to augment our existing cash resources and cash flow from operations to satisfy our cash requirements for future acquisitions or other strategic purposes, we expect that additional funding can be obtained through equity or debt financings or from other sources.

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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