What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 257 added, 184 removed, 897 unchanged (33% of the section changed)

3 unchanged sentences

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

September 30,

Current assets:

Cash and cash equivalents

Marketable securities—available-for-sale (amortized cost $ 283,380 and $ 288,199 as of June 30, 2021 and December 31, 2020;

allowance for credit losses $ 0 and $ 0 as of June 30, 2021 and December 31, 2020)

Marketable securities—available-for-sale (amortized cost $ 285,135 and $ 288,199 as of September 30, 2021 and December 31, 2020;

allowance for credit losses $ 0 and $ 0 as of September 30, 2021 and December 31, 2020)

Accounts receivable

23 unchanged sentences

5,000,000 shares authorized;

none issued or outstanding as of June 30, 2021 and December 31, 2020

none issued or outstanding as of September 30, 2021 and December 31, 2020

Common stock, $ 0.001 par value;

400,000,000 shares authorized;

220,424,569 and 219,489,329 shares issued and outstanding as of June 30, 2021 and December 31, 2020 , respectively

220,885,119 and 219,489,329 shares issued and outstanding as of September 30, 2021 and December 31, 2020 , respectively

Additional paid-in capital

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Product revenues, net

23 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation

Foreign currency translation (loss) gain

Unrealized (loss) gain on marketable securities, net of tax

6 unchanged sentences

(unaudited, in thousands, except number of shares)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Accumulated Other

4 unchanged sentences

( 1,726,455 )

Issuance of 389,512 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units

Issuance of 389,512 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes

Issuance of 1,357 shares of Common Stock for services rendered

3 unchanged sentences

( 1,672,920 )

Issuance of 390,001 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and 153,082 shares of Common Stock under the ESPP

Issuance of 390,001 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes and 153,082 shares of Common Stock under the ESPP

Issuance of 1,288 shares of Common Stock for services rendered

3 unchanged sentences

( 1,523,464 )

Issuance of 459,084 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes

Issuance of 1,466 shares of Common Stock for services rendered

Stock compensation

Other comprehensive loss

Balances at September 30, 2021

( 1,341,725 )

INCYTE CORPORATION

1 unchanged sentence

(unaudited, in thousands, except number of shares)

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

Accumulated Other

4 unchanged sentences

( 1,430,758 )

Issuance of 772,538 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units

Issuance of 772,538 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes

Issuance of 1,957 shares of Common Stock for services rendered

3 unchanged sentences

( 2,151,400 )

Issuance of 936,688 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and 175,615 shares of Common Stock under the ESPP

Issuance of 936,688 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes and 175,615 shares of Common Stock under the ESPP

Issuance of 1,403 shares of Common Stock for services rendered

4 unchanged sentences

( 1,861,102 )

Issuance of 698,032 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes

Issuance of 1,434 shares of Common Stock for services rendered

Issuance of 134,413 shares of Common Stock upon conversion of Convertible Senior Notes due 2020

Stock compensation

Other comprehensive income

Balances at September 30, 2020

( 1,876,305 )

See accompanying notes.

2 unchanged sentences

(unaudited, in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities :

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Cash flows from financing activities :

Proceeds from issuance of common stock under stock plans

Proceeds from issuance of common stock under stock plans net of tax withholding

Payment of finance lease liabilities

Payment of contingent consideration

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rates on cash, cash equivalents, restricted cash and investments

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

September 30, 2021

Organization and business

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

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

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

Our operations are treated as one operating segment.

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The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and six months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The condensed consolidated balance sheet at December 31, 2020 has been derived from our audited consolidated financial statements.

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Financial assets measured at amortized cost are assessed for future expected credit losses under guidance within ASC 326, Financial Instruments – Credit Losses , to determine if application of an expected credit losses reserve is necessary.

On a quarterly basis, receivables that resulted from revenue transactions within the scope of ASC 606 and recognized on an amortized cost basis are reviewed on a customer-level basis to analyze expectations of future collections based upon past history of collections, payment, aging of receivables and viability of the customer to continue payment, as well as estimates of future economic conditions.

On a quarterly basis, receivables that resulted from revenue transactions within the scope of ASC 606, Revenue from Contracts with Customers , and recognized on an amortized cost basis are reviewed on a customer-level basis to analyze expectations of future collections based upon past history of collections, payment, aging of receivables and viability of the customer to continue payment, as well as estimates of future economic conditions.

Receivables generally consist of two types:

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Accounts Receivable.

As of June 30, 2021 and December 31, 2020, we had no allowance for doubtful accounts.

As of September 30, 2021 and December 31, 2020, we had no allowance for doubtful accounts.

We provide an allowance for doubtful accounts based on management’s assessment of the collectability of specific customer accounts, which includes consideration of the credit worthiness and financial condition of those customers, aging of such receivables, history of collectability with the customer and the general economic environment.

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Inventories are determined at the lower of cost and net realizable value with cost determined under the specific identification method and may consist of raw materials, work in process and finished goods.

We began capitalizing PEMAZYRE inventory after FDA approval in April 2020 as the related costs were expected to be recoverable through the commercialization of the product.

Costs incurred prior to FDA approval have been recorded as research and development expense in our statements of operations.

As a result, cost of product revenues for the next 33 months will reflect a lower average per unit cost of materials.

JAKAFI, ICLUSIG and PEMAZYRE raw materials and work-in-process inventory are not subject to expiration and the shelf life of finished goods inventory is 36 months from the start of manufacturing of the finished goods.

We capitalize inventory after FDA approval as the related costs are expected to be recoverable through the commercialization of the product.

Costs incurred prior to FDA approval are recorded as research and development expense in our statements of operations.

Raw materials and work-in-process inventory are not subject to expiration and the shelf life of finished goods inventory is approximately 36 months from the start of manufacturing of the finished goods.

We evaluate for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life.

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If both of these criteria are satisfied, we are identified as the primary beneficiary of the VIE.

As of June 30, 2021, there were no entities in which we held a variable interest which we determined to be VIEs.

As of September 30, 2021, there were no entities in which we held a variable interest which we determined to be VIEs.

Long Term Investments.

35 unchanged sentences

The primary factors used to assess the likelihood of realization are our recent history of cumulative earnings or losses, expected reversals of taxable temporary timing differences, forecasts of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets.

Upon evaluating and weighting both positive and negative evidence, we concluded that we should continue to maintain the valuation allowance on the majority of our deferred tax assets as of June 30, 2021.

We recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical merits of the position.

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We do not expect the CARES Act to have a material impact on our overall financial results, our income tax provision or our liquidity.

We have further described the impact and risks of the COVID-19 pandemic on our business in Item 1.

Business and in Item 1A.

We have further described the impact and risks of the COVID-19 pandemic on our business in Item 1A.

Risk Factors.

16 unchanged sentences

Product Revenues

Our product revenues consist of sales of JAKAFI and PEMAZYRE in the U.S., sales of PEMAZYRE and ICLUSIG in Europe, and sales of PEMAZYRE in Japan.

Our product revenues consist of sales of JAKAFI and PEMAZYRE in the U.S., sales of MINJUVI, PEMAZYRE and ICLUSIG in Europe, and sales of PEMAZYRE in Japan.

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

We sell JAKAFI and PEMAZYRE to our customers in the U.S., which include specialty pharmacies and wholesalers.

We sell PEMAZYRE and ICLUSIG to our customers in the European Union and certain other jurisdictions, which include retail pharmacies, hospital pharmacies and distributors.

We sell MINJUVI, PEMAZYRE and ICLUSIG to our customers in the European Union and certain other jurisdictions, which include retail pharmacies, hospital pharmacies and distributors.

We sell PEMAZYRE in Japan to an exclusive wholesaler.

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Milestone and Contract Revenues

For each collaborative research, development and/or commercialization agreement that results in revenue under the guidance of ASC 606, Revenue from Contracts with Customers, we identify all material performance obligations, which may include the license to intellectual property and know-how, research and development activities and/or other activities.

For each collaborative research, development and/or commercialization agreement that results in revenue under the guidance of ASC 606 we identify all material performance obligations, which may include the license to intellectual property and know-how, research and development activities and/or other activities.

In order to determine the transaction price, in addition to any upfront payment, we estimate the amount of variable consideration, including milestone payments, at the outset of the contract utilizing the most likely amount method.

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We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

For the three and six months ended June 30, 2021 and 2020, we had no revenues from intellectual property licenses recognized over time.

For the three and nine months ended September 30, 2021 and 2020, we had no revenues from intellectual property licenses recognized over time.

For milestone revenues related to sales-based achievements, we recognize the milestone revenues in the corresponding period of the product sale, in accordance with the guidance of ASC 606-10-55-65 for contracts that include a license to intellectual property and the license is the predominant item to which the product sale relates.

13 unchanged sentences

Cost of Product Revenues

Cost of product revenues includes all JAKAFI, ICLUSIG and PEMAZYRE related product costs.

Cost of product revenues includes all product related costs.

In addition, cost of product revenues include low single-digit royalties under our collaboration and license agreement to Novartis on all future sales of JAKAFI in the United States and the amortization of our licensed intellectual property for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years from the date of acquisition on June 1, 2016 of all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l.

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These professional fees are expensed based on their percentage of completion at a particular date.

Our CRO contracts generally include pass

through fees.

Pass through fees include, but are not limited to, regulatory expenses, investigator fees, travel costs, and other miscellaneous costs, including shipping and printing fees.

Our CRO contracts generally include pass through fees.

Pass through fees include, but are not limited to, regulatory expenses, investigator fees, travel costs, and other

miscellaneous costs, including shipping and printing fees.

We expense the costs of pass through fees under our CRO contracts as they are incurred, based on the best information available to us at the time.

13 unchanged sentences

Advertising expenses, comprised primarily of television, radio, print media and Internet advertising, are expensed as incurred and are included in selling, general, and administrative expenses.

For the three and six months ended June 30, 2021, advertising expenses were approximately $ 7.5 million and $ 18.3 million, respectively.

For the three and six months ended June 30, 2020, advertising expenses were approximately $ 5.3 million and $ 10.1 million, respectively.

For the three and nine months ended September 30, 2021, advertising expenses were approximately $ 13.7 million and $ 32.0 million, respectively.

For the three and nine months ended September 30, 2020, advertising expenses were approximately $ 6.4 million and $ 16.5 million, respectively.

Long Term Incentive Plans.

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Under collaboration and license agreements with shared commercialization efforts, we record our share of the losses from the co-commercialization efforts in collaboration loss sharing on the condensed consolidated statement of operations.

For the three and six months ended June 30, 2021 and 2020, collaboration loss

sharing represents our 50 % share of the United States loss for commercialization of MONJUVI (tafasitamab) under our agreement with MorphoSys.

For the three and nine months ended September 30, 2021 and 2020, collaboration

loss sharing represents our 50 % share of the United States loss for commercialization of MONJUVI (tafasitamab-cxix) under our agreement with MorphoSys.

Recent Accounting Pronouncements

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

JAKAFI revenues, net

1 unchanged sentence

PEMAZYRE revenues, net

MINJUVI revenues, net

Total product revenues, net

18 unchanged sentences

government debt securities that are classified as available-for-sale.

At June 30, 2021 and December 31, 2020, our Level 2 U.S.

At September 30, 2021 and December 31, 2020, our Level 2 U.S.

government debt securities were valued using readily available pricing sources which utilize market observable inputs, including the current interest rate and other characteristics for similar types of investments.

Our long term investments classified as Level 1 were valued using their respective closing stock prices on The Nasdaq Stock Market.

We did not experience any transfers of financial instruments between the fair value hierarchy levels during the six months ended June 30, 2021.

We did not experience any transfers of financial instruments between the fair value hierarchy levels during the nine months ended September 30, 2021.

The following fair value hierarchy table presents information about each major category of our financial assets measured at fair value on a recurring basis (in thousands):

5 unchanged sentences

Balance as of

June 30, 2021

September 30, 2021

Cash and cash equivalents

18 unchanged sentences

Balance as of

June 30, 2021

September 30, 2021

Acquisition-related contingent consideration

14 unchanged sentences

Change in fair value of contingent consideration

Balance at June 30,

Balance at September 30,

The fair value of the contingent consideration was determined on the date of acquisition, June 1, 2016, using an income approach based on estimated ICLUSIG revenues in the European Union and other countries for the approved third line treatment over 18 years , and discounted to present value at a rate of 10 %.

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

The valuation inputs utilized to estimate the fair value of the contingent consideration as of June 30, 2021 included a weighted average cost of capital of 10 % and updated projections of future ICLUSIG revenues in the European Union and other countries for the approved third line treatment.

The change in fair value of the contingent consideration during the three and six months ended June 30, 2021 was due primarily to the passage of time as there were no other significant changes in the key assumptions during the period.

The valuation inputs utilized to estimate the fair value of the contingent consideration as of September 30, 2021 included a weighted average cost of capital of 10 % and updated projections of future ICLUSIG revenues in the European Union and other countries for the approved third line treatment.

The change in fair value of the contingent consideration during the three and nine months ended September 30, 2021 was due primarily to the passage of time and the impact of updated projections of future ICLUSIG revenues in the European Union.

We make payments to Takeda quarterly based on the royalties or any additional milestone payments earned in the previous quarter.

At June 30, 2021 and December 31, 2020, contingent consideration earned but not yet paid was $ 8.6 million and $ 9.6 million, respectively, and was included in accrued and other current liabilities.

At September 30, 2021 and December 31, 2020, contingent consideration earned but not yet paid was $ 9.9 million and $ 9.6 million, respectively, and was included in accrued and other current liabilities.

The following is a summary of our marketable security portfolio for the periods presented (in thousands):

June 30, 2021

September 30, 2021

Debt securities (government)

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Debt security assets were assessed for risk of expected credit losses per our accounting policy as described in Note 2.

As of June 30, 2021 and December 31, 2020, the available-for-sale debt securities were held in US-government backed funds and Treasury assets and were assessed on an individual security basis to have a de minimis risk of credit loss.

As of September 30, 2021 and December 31, 2020, the available-for-sale debt securities were held in US-government backed funds and Treasury assets and were assessed on an individual security basis to have a de minimis risk of credit loss.

Concentration of credit risk and current expected credit losses

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In July 2019, we entered into a collaboration and license agreement with Zai Lab (Shanghai) Co., Ltd., a subsidiary of Zai Lab Limited (collectively, “Zai Lab”).

The above collaboration partners comprised, in aggregate, 28 % and 42 % of the accounts receivable balance as of June 30, 2021 and December 31, 2020, respectively.

The above collaboration partners comprised, in aggregate, 37 % and 42 % of the accounts receivable balance as of September 30, 2021 and December 31, 2020, respectively.

For further information relating to these collaboration and license agreements, refer to Note 9.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

We are exposed to risks associated with extending credit to customers related to the sale of products.

Customers A, B, C and D comprised, in aggregate, 34 % and 29 % of the accounts receivable balance as of June 30, 2021 and December 31, 2020, respectively.

The concentration of credit risk relating to ICLUSIG product revenues or accounts receivable is not significant.

We assessed our collaborative and customer receivable assets as of June 30, 2021 according to our accounting policy for applying reserves for expected credit losses, noting minimal history of uncollectible receivables and the continued perceived creditworthiness of our third party sales relationships, upon which the expected credit losses were considered de minimis.

Customers A, B, C, D and E comprised, in aggregate, 32 % and 33 % of the accounts receivable balance as of September 30, 2021 and December 31, 2020, respectively.

The concentration of credit risk relating to ICLUSIG and MINJUVI product revenues or accounts receivable is not significant.

We assessed our collaborative and customer receivable assets as of September 30, 2021 according to our accounting policy for applying reserves for expected credit losses, noting minimal history of uncollectible receivables and the continued perceived creditworthiness of our third party sales relationships, upon which the expected credit losses were considered de minimis.

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

September 30,

Raw materials

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Inventories, stated at the lower of cost and net realizable value, consist of raw materials, work in process and finished goods.

At June 30, 2021, $ 16.7 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months.

At June 30, 2021, $ 35.6 million of inventory was classified as noncurrent on the condensed consolidated balance sheets as we did not expect this inventory to be consumed for commercial use within the next twelve months.

At September 30, 2021, $ 21.3 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months.

At September 30, 2021, $ 30.9 million of inventory was classified as noncurrent on the condensed consolidated balance sheets as we did not expect this inventory to be consumed for commercial use within the next twelve months.

We obtain some inventory components from a limited number of suppliers due to technology, availability, price, quality or other considerations.

The loss of a supplier, the deterioration of our relationship with a supplier, or any unilateral violation of the contractual terms under which we are supplied components by a supplier could adversely affect our total revenues and gross margins.

We capitalize inventory after FDA approval as the related costs are expected to be recoverable through the commercialization of the product.

Costs incurred prior to FDA approval are recorded as research and development expense in our statements of operations.

At September 30, 2021, inventory with approximately $ 72.1 million of product costs incurred prior to FDA approval had not yet been sold.

We expect to sell the pre commercialization inventory over the next 3 to 36 months and as a result, cost of product revenues for will reflect a lower average per unit cost of materials.

Property and equipment, net

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

September 30,

Office equipment

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In March 2017, we acquired additional adjacent buildings to our global headquarters in Wilmington, Delaware and in 2019, began demolition of these buildings and construction of a new laboratory and office building totaling approximately 200,000 square feet.

As of June 30, 2021, we have capitalized approximately $ 125.6 million in on site preparation, design and construction costs and currently expect the building to be completed in the first half of 2022.

As of September 30, 2021, we have capitalized approximately $ 140.7 million in on site preparation, design and construction costs and currently expect the building to be completed in the first half of 2022.

In February 2018, we signed an agreement to rent a building in Morges, Switzerland for an initial term of 15 years plus one year of free rent, with multiple options to extend for an additional 20 years .

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At that time, we determined the lease to be a finance lease and recorded a lease liability of $ 31.1 million and a finance lease right-of-use asset of $ 29.1 million, net of a lease incentive from our landlord of $ 2.0 million.

At March 31, 2021, we capitalized approximately $ 19.1 million in leasehold improvements.

We have capitalized approximately $ 19.1 million in leasehold improvements as of September 30, 2021 relating to Morges.

In July 2018, we signed an agreement to purchase land located in Yverdon, Switzerland.

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Upon this parcel, we are constructing a large molecule production facility.

Construction activity commenced in July 2018 and as of June 30, 2021, we have capitalized approximately $ 188.8 million in costs for construction, ground preparation and architectural and engineering studies.

Construction activity commenced in July 2018 and as of September 30, 2021, we have capitalized approximately $ 186.7 million in construction in progress for costs for construction, ground preparation and architectural and engineering studies.

We currently expect the facility will be operational in the first half of 2022.

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Our current operating lease liabilities are reflected in accrued and other current liabilities and our noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheets and are as follows (in thousands):

September 30,

Operating lease liabilities

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Total lease liabilities

The cash paid for amounts included in the measurement of our operating lease liabilities for the six months ended June 30, 2021 and 2020 was $ 6.9 million and $ 5.9 million, respectively, in operating cash flows.

The cash paid for amounts included in the measurement of our finance lease liabilities for the six months ended June 30, 2021 and 2020 was $ 1.2 million and $ 0.4 million, respectively, in financing cash flows.

As of June 30, 2021, our finance and operating leases had a weighted average lease term of approximately 13.8 and 4.7 years, respectively.

The cash paid for amounts included in the measurement of our operating lease liabilities for the nine months ended September 30, 2021 and 2020 was $ 11.4 million and $ 8.7 million, respectively, in operating cash flows.

The cash paid for amounts included in the measurement of our finance lease liabilities for the nine months ended September 30, 2021 and 2020 was $ 1.8 million and $ 0.6 million, respectively, in financing cash flows.

As of September 30, 2021, our finance and operating leases had a weighted average lease term of approximately 13.6 and 4.7 years, respectively.

The discount rate of our leases is an approximation of an estimated incremental borrowing rate and is dependent upon the term and economics of each agreement.

The weighted average discount rate of our finance and operating leases is approximately 4.1 % and 8.8 %, respectively.

For the three and six months ended June 30, 2021, we incurred approximately $ 3.7 million and $ 7.2 million, respectively, of expense related to our operating leases, approximately $ 0.7 million and $ 1.3 million, respectively, of amortization on our finance lease right-of-use assets and approximately $ 0.3 million and $ 0.6 million, respectively, of interest expense on our finance lease liabilities.

For the three and six months ended June 30, 2020, we incurred approximately $ 2.9 million and $ 6.1 million, respectively, of expense related to our operating leases, approximately $ 0.7 million and $ 1.3 million, respectively, of amortization on our finance lease right-of-use assets and approximately $ 0.3 million and $ 0.6 million, respectively, of interest expense on our finance lease liabilities.

For the three and six months ended June 30, 2021 and 2020, the cost of our short term leases with a term less than 12 months was de minimis.

For the three and nine months ended September 30, 2021, we incurred approximately $ 3.5 million and $ 10.7 million, respectively, of expense related to our operating leases, approximately $ 0.7 million and $ 2.0 million, respectively, of amortization on our finance lease right-of-use assets and approximately $ 0.4 million and $ 1.0 million, respectively, of interest expense on our finance lease liabilities.

For the three and nine months ended September 30, 2020, we incurred approximately $ 2.9 million and $ 9.0 million, respectively, of expense related to our operating leases, approximately $ 0.7 million and $ 1.9 million, respectively, of amortization on our finance lease right-of-use assets and approximately $ 0.3 million and $ 0.9 million, respectively, of interest expense on our finance lease liabilities.

For the three and nine months ended September 30, 2021 and 2020, the cost of our short term leases with a term less than 12 months was de minimis.

Intangible assets and goodwill

1 unchanged sentence

The components of intangible assets were as follows (in thousands, except for useful life):

Balance at June 30, 2021

Balance at September 30, 2021

Balance at December 31, 2020

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Amortization expense

There were no changes to the carrying amount of goodwill for the six months ended June 30, 2021.

There were no changes to the carrying amount of goodwill for the nine months ended September 30, 2021.

License agreements

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We became eligible to receive up to $ 75.0 million of additional potential development and regulatory milestones relating to GVHD.

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 $ 200.0 million for the achievement of sales milestones through June 30, 2021.

We recognize development and regulatory milestones upon confirmation of achievement of the event, as development and regulatory approvals are events not controllable by us but rather development activities of Novartis and decisions made by regulatory agencies.

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Since the achievement of the $ 60.0 million regulatory milestone related to reimbursement of JAKAVI in Europe in September 2014, we are obligated to pay to Novartis tiered royalties in the low single-digits on future JAKAFI net sales within the United States.

During the three and six months ended June 30, 2021, such royalties payable to Novartis on net sales within the United States totaled $ 25.9 million and $ 43.7 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

During the three and six months ended June 30, 2020, such royalties payable to Novartis on net sales within the United States totaled $ 23.2 million and $ 40.7 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

At June 30, 2021 and December 31, 2020, $ 118.6 million and $ 96.4 million, respectively, of accrued royalties payable to Novartis were included in accrued and other current liabilities on the condensed consolidated balance sheets.

company is responsible for costs relating to the development and commercialization of ruxolitinib in its respective territories, with costs of collaborative studies shared equally.

During the three and nine months ended September 30, 2021, such royalties payable to Novartis on net sales within the United States totaled $ 26.9 million and $ 70.6 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

During the three and nine months ended September 30, 2020, such royalties payable to Novartis on net sales within the United States totaled $ 23.9 million and $ 64.6 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations.

At September 30, 2021 and December 31, 2020, $ 132.4 million and $ 96.4 million, respectively, of accrued royalties payable to Novartis were included in accrued and other current liabilities on the condensed consolidated balance

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.

4 unchanged sentences

Reimbursable costs incurred after the effective date of the agreement with Novartis are recorded net against the related research and development expenses.

Research and development expenses for the three and six months ended June 30, 2021 were net of $ 0.0 million and $ 0.1 million, respectively, of costs reimbursed by Novartis.

Research and development expenses for the three and six months ended June 30, 2020 were net of $ 0.0 million and $ 0.3 million, respectively, of costs reimbursed by Novartis.

At June 30, 2021 and December 31, 2020, $ 0.1 million and $ 0.2 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

Milestone and contract revenue under the Novartis agreement for the three and six months ended June 30, 2021 was $ 0.0 million.

Milestone and contract revenue under the Novartis agreement for the three and six months ended June 30, 2020 was $ 90.0 million.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2021 was $ 82.0 million and $ 147.6 million, respectively.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2020 was $ 66.2 million and $ 122.6 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2021 was $ 2.5 million and $ 4.5 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2020 was $ 0.7 million.

Research and development expenses for the three and nine months ended September 30, 2021 were net of $ 0.0 million and $ 0.1 million, respectively, of costs reimbursed by Novartis.

Research and development expenses for the three and nine months ended September 30, 2020 were net of $ 0.0 million and $ 0.3 million, respectively, of costs reimbursed by Novartis.

At September 30, 2021 and December 31, 2020, $ 0.2 million and $ 0.2 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

Milestone and contract revenue under the Novartis agreement for the three and nine months ended September 30, 2020 was $ 0.0 million and $ 90.0 million, respectively.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and nine months ended September 30, 2021 was $ 94.7 million and $ 242.3 million, respectively.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and nine months ended September 30, 2020 was $ 68.3 million and $ 190.9 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and nine months ended September 30, 2021 was $ 2.7 million and $ 7.3 million, respectively.

Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and nine months ended September 30, 2020 was $ 1.4 million and $ 2.1 million, respectively.

Lilly – Baricitinib

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We received an upfront payment of $ 90.0 million, and were initially eligible to receive up to $ 665.0 million in substantive milestone payments across multiple indications upon the achievement of pre-specified events, including up to $ 150.0 million for the achievement of development milestones, up to $ 365.0 million for the achievement of regulatory milestones and up to $ 150.0 million for the achievement of sales milestones.

Exclusive of the upfront payment of $ 90.0 million received in 2009, we have recognized and received, in aggregate, $ 149.0 million for the achievement of development milestones and $ 265.0 million for the achievement of regulatory milestones through June 30, 2021.

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

Milestone and contract revenue under the Lilly agreement for the three and six months ended June 30, 2021 and 2020 was $ 0.0 million.

Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and six months ended June 30, 2021 was $ 36.0 million and $ 68.3 million, respectively.

Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and six months ended June 30, 2020 was $ 25.8 million and $ 51.3 million, respectively.

Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and nine months ended September 30, 2021 was $ 86.6 million and $ 154.9 million, respectively.

Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and nine months ended September 30, 2020 was $ 28.6 million and $ 79.9 million, respectively.

Lilly - Ruxolitinib

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common stock priced at market, with per share pricing ranging from $ 4.59 to $ 5.41 , resulting in gross proceeds of approximately $ 8.2 million.

As of June 30, 2021, we owned approximately 6 % of the outstanding shares of Agenus Inc.

In the third quarter of 2021, we sold approximately 0.2 million shares of Agenus Inc.

common stock priced at market, with per share pricing ranging from $ 5.74 to $ 6.75 , resulting in gross proceeds of approximately $ 1.1 million.

As of September 30, 2021, we owned approximately 5 % of the outstanding shares of Agenus Inc.

common stock.

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at fair value, whereby the investment is marked to market through earnings in each reporting period.

For the three and six months ended June 30, 2021, we recorded an unrealized gain of $ 37.8 million and $ 31.9 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during these periods.

For the three and six months ended June 30, 2020, we recorded an unrealized gain of $ 26.2 million and an unrealized loss of $ 2.7 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during these periods.

For the three and nine months ended September 30, 2021, we recorded an unrealized loss of $ 2.8 million and an unrealized gain of $ 29.1 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during these periods.

For the three and nine months ended September 30, 2020, we recorded an unrealized gain of $ 3.9 million and $ 1.2 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during these periods.

The fair market value of our long term investment in Agenus Inc.

at June 30, 2021 and December 31, 2020 was $ 67.3 million and $ 44.7 million, respectively.

Research and development expenses for the three and six months ended June 30, 2021 also included $ 0.2 million and $ 0.7 million, respectively, of development costs incurred pursuant to the Agenus arrangement.

Research and development expenses for the three and six months ended June 30, 2020 also included $ 0.2 million and $ 0.3 million, respectively, of development costs incurred pursuant to the Agenus arrangement.

At June 30, 2021 and December 31, 2020, a total of $ 0.6 million and $ 0.5 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

at September 30, 2021 and December 31, 2020 was $ 63.4 million and $ 44.7 million, respectively.

Research and development expenses for the three and nine months ended September 30, 2021 also included $ 0.2 million and $ 0.9 million, respectively, of development costs incurred pursuant to the Agenus arrangement.

Research and development expenses for the three and nine months ended September 30, 2020 also included $ 0.1 million and $ 0.4 million, respectively, of development costs incurred pursuant to the Agenus arrangement.

At September 30, 2021 and December 31, 2020, a total of $ 0.8 million and $ 0.5 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

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

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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.

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 %.

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In January 2021, we purchased 350,000 common shares in Merus’ underwritten public offering of 4,848,485 common shares at the public offering price of $ 24.75 per share, or an aggregate purchase price of $ 8.7 million.

The fair market value of our total long term investment in Merus at June 30, 2021 and December 31, 2020 was $ 74.8 million and $ 56.1 million, respectively.

The fair market value of our total long term investment in Merus at September 30, 2021 and December 31, 2020 was $ 78.1 million and $ 56.1 million, respectively.

We concluded Merus is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest.

As of June 30, 2021, we owned approximately 9 % of the outstanding common shares of Merus and conclude that we have the ability to exercise significant influence, but not control, over Merus based primarily on our ownership interest, the level of intra-entity transactions between us and Merus related to development expenses, as well as other qualitative factors.

As of September 30, 2021, we owned approximately 9 % of the outstanding common shares of Merus and conclude that we have the ability to exercise significant influence, but not control, over Merus based primarily on our ownership interest, the level of intra-entity transactions between us and Merus related to development expenses, as well as other qualitative factors.

We have elected the fair value option to account for our long term investment in Merus whereby the investment is marked to market through earnings in each reporting period.

We believe the fair value option to be the most appropriate accounting method to account for securities in publicly held collaborators for which we have significant influence.

For the three and six months ended June 30, 2021, we recorded an unrealized gain of $ 0.6 million and $ 10.0 million, respectively, based on the change in fair value of Merus’ common shares during these periods.

For the three and six months ended June 30, 2020, we recorded an unrealized gain of $ 12.7 million and $ 6.4 million, respectively, based on the change in fair value of Merus’ common shares during these periods.

Research and development expenses for the three and six months ended June 30, 2021 included $ 5.5 million and $ 7.8 million, respectively, of additional development costs incurred pursuant to the Merus agreement.

Research and development expenses for the three and six months ended June 30, 2020 included $ 1.9 million and $ 4.2 million, respectively, of additional development costs incurred pursuant to the Merus agreement.

At June 30, 2021 and December 31, 2020, a total of $ 2.2 million and $ 1.6 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

For the three and nine months ended September 30, 2021, we recorded an unrealized gain of $ 3.3 million and $ 13.3 million, respectively, based on the change in fair value of Merus’ common shares during these periods.

For the three and nine months ended September 30, 2020, we recorded an unrealized loss of $ 13.1 million and $ 6.7 million, respectively, based on the change in fair value of Merus’ common shares during these periods.

Research and development expenses for the three and nine months ended September 30, 2021 included $ 3.1 million and $ 10.9 million, respectively, of additional development costs incurred pursuant to the Merus agreement.

Research and development expenses for the three and nine months ended September 30, 2020 included $ 1.8 million and $ 6.0 million, respectively, of additional development costs incurred pursuant to the Merus agreement.

At September 30, 2021 and December 31, 2020, a total of $ 1.6 million and $ 1.6 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

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

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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.

As of June 30, 2021, we have paid Calithera an upfront license fee of $ 45.0 million and an additional $ 12.0 million milestone payment.

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.

As of September 30, 2021, we have paid Calithera an upfront license fee of $ 45.0 million and an additional $ 12.0 million milestone payment.

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

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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 addition, in January 2017, we entered into a Stock Purchase Agreement with Calithera for the purchase of 1.7 million common shares of Calithera for an aggregate purchase price of $ 8.0 million in cash, or $ 4.65 per share.

In addition, in January 2017, we entered into a Stock Purchase Agreement with Calithera for the purchase of 1.7 million shares of common stock of Calithera for an aggregate purchase price of $ 8.0 million in cash, or $ 4.65 per share.

We completed the purchase of the shares on January 30, 2017 when the closing price on The Nasdaq Stock Market was $ 6.75 per share.

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Of the $ 53.0 million, $ 11.6 million was allocated to our stock purchase in Calithera and was recorded within long term investments and $ 41.4 million was allocated to research and development expense.

The fair market value of our long term investment in Calithera at June 30, 2021 and December 31, 2020 was $ 3.6 million and $ 8.4 million, respectively.

The fair market value of our long term investment in Calithera at September 30, 2021 and December 31, 2020 was $ 3.8 million and $ 8.4 million, respectively.

We concluded Calithera is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest.

As of June 30, 2021, we owned approximately 2 % of the outstanding shares of Calithera common stock and there are several other stockholders who hold larger positions of Calithera.

As of September 30, 2021, we owned approximately 2 % of the outstanding shares of Calithera common stock and there are several other stockholders who hold larger positions of Calithera.

As we do not hold a significant position of the voting shares of Calithera and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment.

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Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying condensed consolidated balance sheets.

For the three and six months ended June 30, 2021 we recorded an unrealized loss of $ 0.5 million and $ 4.8 million, respectively, based on the change in fair value of Calithera’s common stock during these periods.

For the three and six months ended June 30, 2020 we recorded an unrealized gain of $ 1.5 million and an unrealized loss of $ 0.7 million, respectively, based on the change in fair value of Calithera’s common stock during these periods.

Research and development expenses for the three and six months ended June 30, 2021 also included $ 2.0 million and $ 4.5 million, respectively, of additional development costs incurred pursuant to the Calithera agreement.

Research and development expenses for the three and six months ended June 30, 2020 also included $ 1.9 million and $ 4.4 million, respectively, of additional development costs incurred pursuant to the Calithera agreement.

At June 30, 2021 and December 31, 2020, a total of $ 0.0 million and $ 0.6 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

For the three and nine months ended September 30, 2021 we recorded an unrealized gain of $ 0.2 million and an unrealized loss of $ 4.6 million, respectively, based on the change in fair value of Calithera’s common stock during these periods.

For the three and nine months ended September 30, 2020 we recorded an unrealized loss of $ 3.2 million and $ 3.9 million, respectively, based on the change in fair value of Calithera’s common stock during these periods.

Research and development expenses for the three and nine months ended September 30, 2021 also included $ 0.3 million and $ 4.8 million, respectively, of additional development costs incurred pursuant to the Calithera agreement.

Research and development expenses for the three and nine months ended September 30, 2020 also included $ 2.0 million

and $ 6.4 million, respectively, of additional development costs incurred pursuant to the Calithera agreement.

At September 30, 2021 and December 31, 2020, a total of $ 0.0 million and $ 0.6 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

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

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

As of June 30, 2021, we have paid MacroGenics an upfront payment of $ 150.0 million and developmental milestones totaling $ 70.0 million.

As of September 30, 2021, we have paid MacroGenics an upfront payment of $ 150.0 million and developmental milestones totaling $ 70.0 million.

MacroGenics is eligible to receive up to an additional $ 350.0 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.

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

Research and development expenses for the three and six months ended June 30, 2021 also included $ 17.6 million and $ 31.2 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement.

Research and development expenses for the three and six months ended June 30, 2020 also included $ 16.3 million and $ 32.7 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement.

At June 30, 2021 and December 31, 2020, a total of $ 0.9 million and $ 0.1 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Research and development expenses for the three and nine months ended September 30, 2021 also included $ 17.8 million and $ 49.0 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement.

Research and development expenses for the three and nine months ended September 30, 2020 also included $ 10.6 million and $ 43.3 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement.

At September 30, 2021 and December 31, 2020, a total of $ 0.0 million and $ 0.1 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

In January 2018, we entered into a Target Discovery, Research Collaboration and Option Agreement with Syros Pharmaceuticals, Inc.

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

In addition, in January 2018, we entered into a Stock Purchase Agreement with Syros for the purchase of 0.8 million common shares of Syros for an aggregate purchase price of $ 10.0 million in cash, or $ 12.61 per share.

In addition, in January 2018, we entered into a Stock Purchase Agreement with Syros for the purchase of 0.8 million shares of common stock of Syros for an aggregate purchase price of $ 10.0 million in cash, or $ 12.61 per share.

We agreed to not sell or otherwise transfer any of our Syros shares for a period, referred to as the Lock-Up Period, of 12 months after the closing date of the sale.

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The shares we acquired were not registered on the purchase date, and accordingly, we estimated a discount for lack of marketability on the shares of $ 0.1 million, which resulted in a net fair value of the shares on the issuance date of $ 7.6 million.

Of the $10.0 million aggregate purchase price paid, $ 7.6 million was allocated to our stock purchase in Syros and was recorded within long term investments and $ 2.4 million, representing premium paid on the purchase, was allocated to research and development expense.

Of the $10.0 million aggregate purchase price paid, $ 7.6

million was allocated to our stock purchase in Syros and was recorded within long term investments and $ 2.4 million, representing premium paid on the purchase, was allocated to research and development expense.

Also in January 2018, we entered into an Amended Stock Purchase Agreement with Syros for the purchase of an additional 0.1 million common shares of Syros for an aggregate purchase price of $ 1.4 million in cash, or $ 9.55 per share.

The shares were acquired in February 2018

and the $ 1.4 million aggregate purchase price was recorded within long term investments on the condensed consolidated balance sheets.

The shares were acquired in February 2018 and the $ 1.4 million aggregate purchase price was recorded within long term investments on the condensed consolidated balance sheets.

All acquired shares were subsequently registered under the Securities Act of 1933 in February 2018.

The fair market value of our long term investment in Syros as of June 30, 2021 and December 31, 2020 was $ 5.1 million and $ 10.2 million, respectively.

The fair market value of our long term investment in Syros as of September 30, 2021 and December 31, 2020 was $ 4.2 million and $ 10.2 million, respectively.

We concluded Syros is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest.

As of June 30, 2021, we owned approximately 2 % of the outstanding shares of Syros common stock and there are several other stockholders who hold larger positions of Syros.

As of September 30, 2021, we owned approximately 2 % of the outstanding shares of Syros common stock and there are several other stockholders who hold larger positions of Syros.

As we do not hold a significant position of the voting shares of Syros and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment.

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Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying condensed consolidated balance sheets.

For the three and six months ended June 30, 2021, we recorded an unrealized loss of $ 1.9 million and $ 5.1 million, respectively, based on the change in fair value of Syros’ common stock during these periods.

For the three and six months ended June 30, 2020, we recorded an unrealized gain of $ 4.4 million and $ 3.5 million, respectively, based on the change in fair value of Syros’ common stock during these periods.

For the three and nine months ended September 30, 2021, we recorded an unrealized loss of $ 0.9 million and $ 6.0 million, respectively, based on the change in fair value of Syros’ common stock during these periods.

For the three and nine months ended September 30, 2020, we recorded an unrealized loss of $ 1.7 million and an unrealized gain of $ 1.8 million, respectively, based on the change in fair value of Syros’ common stock during these periods.

In December 2018, we entered into a Research Collaboration and Licensing Agreement with Innovent.

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

Research and development expenses for the three and six months ended June 30, 2021 were net of $ 2.3 million of costs reimbursed by Innovent.

Research and development expenses for the three and six months ended June 30, 2020 were net of $ 2.6 million of costs reimbursed by Innovent.

At June 30, 2021 and December 31, 2020, $ 0.9 million and $ 1.2 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

Research and development expenses for the three and nine months ended September 30, 2021 were net of $ 0.0 million and $ 2.3 million of costs reimbursed by Innovent.

Research and development expenses for the three and nine months ended September 30, 2020 were net of $ 1.7 million and $ 4.3 million, respectively, of costs reimbursed by Innovent.

At September 30, 2021 and December 31, 2020, $ 2.4 million and $ 1.2 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

In July 2019, we entered into a Collaboration and License Agreement with Zai Lab.

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

Research and development expenses for the three and six months ended June 30, 2021 were net of $ 0.0 million of costs reimbursed by Zai Lab.

Research and development expenses for the three and six months ended June 30, 2020 were net of $ 0.0 million and $ 0.2 million, respectively, of costs reimbursed by Zai Lab.

At June 30, 2021 and December 31, 2020, $ 0.9 million and $ 0.6 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

Research and development expenses for the three and nine months ended September 30, 2021 were net of $ 3.2 million of costs reimbursed by Zai Lab.

Research and development expenses for the three and nine months ended September 30, 2020 were net of $ 0.0 million and $ 0.2 million, respectively, of costs reimbursed by Zai Lab.

At September 30, 2021 and December 31, 2020, $ 0.8 million and $ 0.6 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

In January 2020, we entered into a Collaboration and License Agreement with MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG (together with MorphoSys AG, “MorphoSys”), covering the worldwide development and commercialization of MOR208 (tafasitamab), an investigational Fc engineered monoclonal antibody directed against the target molecule CD19 that is currently in clinical development by MorphoSys.

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MONJUVI was approved under accelerated approval based on overall response rate.

In August 2021, we and MorphoSys announced that the European Commission granted conditional marketing authorization for MINJUVI (tafasitamab) in combination with lenalidomide, followed by MINJUVI monotherapy, for the treatment of adult patients with relapsed or refractory DLBCL who are not eligible for ASCT.

In addition, under the collaboration agreement and pursuant to a related purchase agreement, we agreed to purchase American Depositary Shares (“ADSs”), each representing 0.25 of an ordinary share of MorphoSys AG, for an aggregate purchase price of $ 150.0 million or $ 41.33 per ADS (such ADSs to be purchased, the “New ADSs”).

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Of the $ 150.0 million aggregate purchase price paid, $ 95.5 million was allocated to our stock purchase in MorphoSys and was recorded within long term investments and $ 54.5 million, representing the premium paid on the purchase, was allocated to research and development expense.

The fair market value of our long term investment in MorphoSys as of June 30, 2021 and December 31, 2020 was $ 69.9 million and $ 102.9 million, respectively.

The fair market value of our long term investment in MorphoSys as of September 30, 2021 and December 31, 2020 was $ 42.7 million and $ 102.9 million, respectively.

We concluded MorphoSys is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest.

As of June 30, 2021, we owned approximately 3 % of the outstanding shares of MorphoSys common stock and there are several other stockholders who hold larger positions of MorphoSys.

As of September 30, 2021, we owned approximately 3 % of the outstanding shares of MorphoSys common stock and there are several other stockholders who hold larger positions of MorphoSys.

As we do not hold a significant position of the voting shares of MorphoSys and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment.

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Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying condensed consolidated balance sheets.

For the three and six months ended June 30, 2021, we recorded an unrealized loss of $ 9.2 million and $ 32.9 million, respectively, based on the change in fair value of MorphoSys’ common stock during these periods.

For the three and six months ended June 30, 2020, we recorded an unrealized gain of $ 27.5 million and $ 17.6 million, respectively, based on the change in fair value of MorphoSys’ common stock during these periods.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the three and six months ended June 30, 2021 was $ 9.8 million and $ 20.3 million, respectively, and is recorded as collaboration loss sharing on the condensed consolidated statement of operations.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the three and six months ended June 30, 2020 was $ 13.3 million and $ 15.4 million, respectively, and is recorded as collaboration loss sharing on the condensed consolidated statement of operations.

Research and development expenses for the three and six months ended June 30, 2021, includes $ 19.4 million and $ 34.3 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

Research and development expenses for the three and six months ended June 30, 2020, includes $ 15.7 million and $ 27.3 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

At June 30, 2021 and December 31, 2020, $ 34.2 million and $ 54.2 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the agreement.

For the three and nine months ended September 30, 2021, we recorded an unrealized loss of $ 27.3 million and $ 60.2 million, respectively, based on the change in fair value of MorphoSys’ common stock during these periods.

For the three and nine months ended September 30, 2020, we recorded an unrealized gain of $ 0.9 million and $ 18.5 million, respectively, based on the change in fair value of MorphoSys’ common stock during these periods.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the three and nine months ended September 30, 2021 was $ 9.1 million and $ 29.5 million, respectively, and is recorded as collaboration loss sharing on the condensed consolidated statement of operations.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the three and nine months ended September 30, 2020 was $ 15.0 million and $ 30.4 million, respectively, and is recorded as collaboration loss sharing on the condensed consolidated statement of operations.

Research and development expenses for the three and nine months ended September 30, 2021, includes $ 21.5 million and $ 55.8 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

Research and development expenses for the three and nine months ended September 30, 2020, includes $ 23.8 million and $ 51.1 million, respectively, related to our 55 % share of the co-development costs for tafasitamab.

At September 30, 2021 and December 31, 2020, $ 52.3 million and $ 54.2 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the agreement.

In September 2020, we entered into a Collaboration and License Agreement with Nimble Therapeutics, Inc.

Under the terms of this agreement, Nimble will utilize their peptide synthesis, screening and optimization platform for discovery and validation of peptides against specified targets.

Under the agreement, Nimble is eligible to

receive up to $ 8.0 million in future contingent discovery milestones and up to $ 127.0 million in future contingent development and regulatory milestones.

Under the agreement, Nimble is eligible to receive up to $ 8.0 million in future contingent discovery milestones and up to $ 127.0 million in future contingent development and regulatory milestones.

Additionally, in the event of successful commercialization, Nimble is eligible to receive up to $ 130.0 million in future contingent sales milestones and tiered royalties on net sales in the low single digits.

In August 2021, we entered into a Collaboration and License Agreement with Sunny Investments Limited, a wholly-owned subsidiary of InnoCare Pharma Limited (“InnoCare”).

InnoCare received development and exclusive commercialization rights to tafasitamab in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

In September 2021, we recognized an upfront payment under this agreement of $ 35.0 million upon our transfer of technology related to the licensed product candidate to InnoCare, which was recorded in milestone and contract revenues on the condensed consolidated statement of operations.

Under the terms of this agreement, we are eligible to receive up to an additional $ 45.0 million in potential development and regulatory milestones.

We recognize development and regulatory milestones upon confirmation of achievement of the event, as development and regulatory approvals are events not controllable by us but rather development activities of InnoCare and decisions made by regulatory agencies.

In the event of commercialization, we are eligible to receive up to $ 37.5 million in potential sales milestones from InnoCare.

We will recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by InnoCare.

We are also eligible to receive tiered royalties from the low to mid-twenties on future product sales resulting from the collaboration.

In September 2021, we entered into a Collaboration and License Agreement with Syndax Pharmaceuticals, Inc.

(“Syndax”), covering the worldwide development and commercialization of SNDX-6352 (“axatilimab”).

Axatilimab, currently in clinical development by Syndax, is a monoclonal antibody that blocks the colony stimulating factor-1 (CSF-1) receptor.

Syndax has exclusive worldwide development and commercialization rights to axatilimab under a June 2016 license agreement with UCB Biopharma Sprl.

Under the terms of the agreement, we will receive exclusive commercialization rights outside of the United States, and Syndax and we will have co-commercialization rights in the United States, with respect to axatilimab in GVHD and potentially other indications.

We will be responsible for leading the global commercialization strategy and Syndax has the option to participate in commercialization efforts in the United States.

We and Syndax will share equally the profits and losses from the co-commercialization efforts in the United States.

We and Syndax have agreed to co-develop axatilimab and to share development costs associated with global clinical trials, with Incyte responsible for 55 % of such costs and Syndax responsible for 45 % of such costs and we will be responsible for funding development activities specific to territories outside of the United States.

Each company will be responsible for funding any independent development activities.

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

The effectiveness of the agreement is conditioned upon expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which we expect to take place in the fourth quarter of 2021.

We have agreed to pay Syndax, upon the effectiveness of the agreement, an upfront non-refundable payment of $ 117.0 million.

Syndax will be eligible to receive up to $ 220.0 million in future contingent development and regulatory milestones and $ 230.0 million in commercialization milestones, as well as tiered royalties in the mid-teens on net sales in Europe in Japan and low double digits on net sales in the rest of the world outside of the United States.

Syndax’s right to receive royalties in any particular country will expire upon the last to occur of (a) the expiration of the licensed patent rights covering the licensed product in that particular country, (b) a specified period of time after the first post-marketing authorization sale of a licensed product in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country.

In addition, under the collaboration agreement and pursuant to a related stock purchase agreement, we agreed to purchase 1,421,523 shares of common stock of Syndax for an aggregate purchase price of $ 35.0 million, or $ 24.62 per share.

We agreed, subject to limited exceptions, not to sell or otherwise transfer any of the shares for a six month period after the closing date of the sale.

Closing of the purchase of the shares is expected to occur concurrently with the effectiveness of the collaboration agreement, and is subject to customary conditions.

Stock compensation

We recorded $ 44.8 million and $ 92.1 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2021, respectively.

We recorded $ 46.3 million and $ 88.8 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2020, respectively.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $ 28.0 million, $ 57.9 million, $ 32.5 million and $ 61.2 million for the three and six months ended June 30, 2021 and 2020, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $ 16.4 million, $ 33.6 million, $ 13.6 million and $ 27.1 million for the three and six months ended June 30, 2021 and 2020, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $ 0.4 million, $ 0.6 million, $ 0.2 million and $ 0.5 million, respectively, for the three and six months ended June 30, 2021 and 2020.

For the three and six months ended June 30, 2021 and 2020, we capitalized $ 0.7 million, $ 1.2 million, $ 0.1 million and $ 0.3 million, respectively, of stock compensation expense as part of the cost of an asset.

We recorded $ 42.7 million and $ 134.8 million of stock compensation expense on our condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively.

We recorded $ 43.8 million and $ 132.6 million of stock compensation expense on our condensed consolidated statements of operations for the three and nine months ended September 30, 2020, respectively.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $ 26.3 million, $ 84.2 million, $ 29.0 million and $ 90.2 million for the three and nine months ended September 30, 2021 and 2020, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $ 15.9 million, $ 49.5 million, $ 14.6 million and $ 41.7 million for the three and nine months ended September 30, 2021 and 2020, respectively.

Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $ 0.5 million, $ 1.1 million, $ 0.2 million and $ 0.7 million, respectively, for the three and nine months ended September 30, 2021 and 2020.

For the three and nine months ended September 30, 2021 and 2020, we capitalized $ 0.6 million, $ 1.8 million, $ 0.2 million and $ 0.5 million, respectively, of stock compensation expense as part of the cost of assets.

We utilized the Black-Scholes valuation model for estimating the fair value of the stock compensation granted, with the following weighted-average assumptions:

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For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Average risk-free interest rates

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Options cancelled

Balance at June 30, 2021

Balance at September 30, 2021

In July 2016, we revised the terms of our annual stock option grants to provide that new option grants would generally have a 10-year term and vest over four years , with 25 % vesting after one year and the remainder vesting in 36 equal monthly installments.

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PSUs cancelled

Balance at June 30, 2021

Balance at September 30, 2021

In January 2014, we began granting RSUs and PSUs to our employees at the share price on the date of grant.

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The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 50 % based on the performance conditions achieved as of the June 30, 2021 end of the performance period and will cliff vest in June 2022.

Compensation expense for the performance-based awards is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement.

For the period ended June 30, 2021, the stock compensation expense recorded during the period was for service-based awards and performance conditions deemed probable of achievement and/or achieved.

For PSUs containing performance conditions which were not deemed probable of achievement at June 30, 2021, no stock compensation expense was recognized.

In July 2018, we granted 77,243 PSUs to executives with performance milestones and graded vesting over four years .

The shares of our common stock into which each PSU may convert is subject to a multiplier up to 150 % based on the level at which the performance condition is achieved.

Compensation expense for the performance-based awards is recorded over the estimated service period when the performance condition is deemed probable of achievement.

The actual number of shares of our common stock into which each PSU converted was at a multiplier of 83 % based on the performance condition being achieved as of December 31, 2018.

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The shares of our common stock into which each PSU may convert is subject to a multiplier up to 125 % based on the level at which the performance condition is achieved.

Compensation expense for the performance-based awards is recorded over the estimated service period when the performance condition is deemed probable of achievement.

The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 101.8 % based on the performance condition being achieved as of December 31, 2019.

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The shares of our common stock into which each PSU may convert is subject to a multiplier up to 200 % based on the level at which the financial and developmental performance conditions are achieved over the service period which ends December 31, 2022.

Compensation expense for the performance-based awards is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement.

For the period ended June 30, 2021, the stock compensation expense recorded during the period was for service-based awards and performance conditions deemed probable of achievement and/or achieved.

For PSUs containing performance conditions which were not deemed probable of achievement at June 30, 2021, no stock compensation expense was recognized.

In July 2021, we granted 107,088 PSUs to executives with performance milestones and cliff vesting on the third anniversary from date of grant.

The shares of our common stock into which each PSU may convert is subject to a multiplier up to 150 % based on the level at which the financial and developmental performance conditions are achieved over the service period which ends December 31, 2023.

Compensation expense for the above performance-based awards is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement.

For PSUs containing performance conditions which were not deemed probable of achievement, no stock compensation expense is recorded.

For the three and nine months ended September 30, 2021 we recorded $ 1.7 million and $ 5.0 million of stock compensation expense for PSUs on our condensed consolidated statements of operations.

For the three and nine months ended September 30, 2020 we recorded $ 2.7 million and $ 11.4 million of stock compensation expense for PSUs on our condensed consolidated statements of operations.

The following table summarizes our shares available for grant under the 2010 Stock Plan:

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Options, RSUs and PSUs cancelled

Balance at June 30, 2021

Balance at September 30, 2021

Based on our historical experience of employee turnover, we have assumed an annualized forfeiture rate of 5 % for our options, RSUs and PSUs.

Under the true-up provisions of the stock compensation guidance, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

Total compensation cost of options granted but not yet vested, as of June 30, 2021, was $ 65.3 million, which is expected to be recognized over the weighted average period of approximately 1.1 years.

Total compensation cost of RSUs granted but not yet vested, as of June 30, 2021, was $ 110.7 million, which is expected to be recognized over the weighted average period of approximately 1.7 years.

Total compensation cost of PSUs granted but not yet vested, as of June 30, 2021, was $ 13.5 million, which is expected to be recognized over the weighted average period of 1.2 years, should the underlying performance conditions be deemed probable of achievement.

Total compensation cost of options granted but not yet vested, as of September 30, 2021, was $ 77.3 million, which is expected to be recognized over the weighted average period of approximately 1.3 years.

Total compensation cost of RSUs granted but not yet vested, as of September 30, 2021, was $ 172.3 million, which is expected to be recognized over the weighted average period of approximately 2.0 years.

Total compensation cost of PSUs granted but not yet vested, as of September 30, 2021, was $ 19.2 million, which is expected to be recognized over the weighted average period of 1.6 years, should the underlying performance conditions be deemed probable of achievement.

Accrued and other current liabilities

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

September 30,

Clinical related costs

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Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations.

Defined contribution expense for the three and six months ended June 30, 2021 was $ 4.3 million and $ 8.4 million, respectively.

Defined contribution expense for the three and six months ended June 30, 2020 was $ 3.3 million and $ 6.6 million, respectively.

Defined contribution expense for the three and nine months ended September 30, 2021 was $ 4.4 million and $ 12.8 million, respectively.

Defined contribution expense for the three and nine months ended September 30, 2020 was $ 3.5 million and $ 10.1 million, respectively.

Defined Benefit Pension Plans

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest cost

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We expect to contribute a total of $ 5.3 million to the pension plans in 2021 inclusive of the amounts contributed to the plan during the current period.

For the three and six months ended June 30, 2021, we recorded income tax expense of approximately $ 22.2 million and $ 38.0 million, respectively.

For the three and six months ended June 30, 2020, we recorded income tax expense of approximately $ 17.0 million and $ 33.5 million, respectively.

The tax expense for the three and six months ended June 30, 2021 and 2020 represents primarily federal and state tax liabilities that are not fully sheltered by net operating losses or research and development tax credit carryforwards.

As of June 30, 2021, a full valuation allowance continues to be recorded against our U.S.

For the three and nine months ended September 30, 2021, we recorded income tax expense of approximately $ 27.7 million and $ 65.7 million, respectively.

For the three and nine months ended September 30, 2020, we recorded income tax expense of approximately $ 11.7 million and $ 45.2 million, respectively.

The tax expense for the three and nine months ended September 30, 2021 and 2020 represents primarily federal and state tax liabilities that are not fully sheltered by net operating losses or research and development tax credit carryforwards.

As of September 30, 2021, a full valuation allowance continues to be recorded against our U.S.

and Swiss net deferred tax assets.

Based upon our analysis of our historical operating results, as well as projections of our future taxable income (losses) during the periods in which the temporary differences will be recoverable, we believe the uncertainty regarding the realization of our U.S.

and Swiss net deferred tax assets requires a full valuation allowance against such net assets as of June 30, 2021.

and Swiss net deferred tax assets requires a full valuation allowance against such net assets as of September 30, 2021.

When performing our assessment on projections of future taxable income (losses), we consider factors such as the likelihood of regulatory approval and commercial success of products currently under development, among other factors.

The balance of our unrecognized tax benefits (including penalties and interest) increased by approximately $ 1.7 million during the six months ended June 30, 2021.

The overall net increase is primarily driven by unrecognized tax benefits related to current year operations and research and development tax credits.

After considering valuation allowance impacts, the change in unrecognized tax benefits resulted in a $ 0.1 million decrease to noncurrent other liabilities on the condensed consolidated balance sheet.

The balance of our unrecognized tax benefits (including penalties and interest) increased by approximately $ 7.3 million during the nine months ended September 30, 2021.

The overall net increase is primarily driven by positions taken on prior year returns in addition to tax benefits related to current year operations and research and development tax credits.

After considering valuation allowance impacts, the change in unrecognized tax benefits resulted in a $ 5.4 million increase to noncurrent other liabilities on the condensed consolidated balance sheet.

Net income (loss) per share

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Outstanding stock options and awards

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Total potential common shares excluded from diluted net income (loss) per share computation

Commitments and contingencies

In August 2021, we entered into a revolving credit and guaranty agreement (the “Credit Agreement”) among the Incyte Corporation, as borrower, subsidiary Incyte Holdings Corporation, as a guarantor, the lenders from time to time party thereto (the “Lenders”), J.P.

Morgan Chase Bank, N.A.

as administrative agent, and the other financial institutions party thereto.

Under the Credit Agreement, the Lenders have committed to provide an unsecured three-year revolving credit facility in an aggregate principal amount of up to $ 500.0 million.

We may increase the maximum revolving commitments or add one or more incremental term loan facilities to the Credit Agreement, subject to obtaining commitments from any participating lenders and certain other conditions, in an amount not to exceed (1) $ 250.0 million plus (2) an additional amount, so long as after giving effect to the incurrence of such additional amount, the Company’s pro forma consolidated leverage ratio would not exceed 0.25 above its consolidated leverage ratio in effect immediately prior to giving effect to such increase.

Loans under the Credit Agreement will bear interest, at our option, at a per annum rate equal to either (a) a base rate plus an applicable rate per annum varying from 0.125 % to 0.875 % depending on our consolidated leverage ratio or (b) a Eurodollar rate plus an applicable rate per annum varying from 1.125 % to 1.875 % depending on our consolidated leverage ratio.

Commitment fees payable on the undrawn amount range from 0.150 % per annum to 0.225 % per annum, based on our consolidated leverage ratio.

As of September 30, 2021, we are in compliance with all financial and operational covenants under the terms of the Credit Agreement and there were no outstanding borrowings or letters of credit outstanding.

We capitalized approximately $ 1.3 million in debt issuance costs related to the execution of the Credit Agreement.

The debt issuance costs are being amortized over the term of the facility.

Contingencies

We have entered into the collaboration agreements described in Note 9, as well as various other collaboration agreements that are not individually, or in the aggregate, significant to our operating results or financial condition at this time.

We 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 agreements, we may be required to pay upfront fees, milestone payments, and royalties on sales of future products.

In December 2018, we received a civil investigative demand from the U.S.

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All briefing on the Motion was completed on December 22, 2020.

While we deny that any improper claims were submitted to government payers, we agreed on May 4, 2021 to settle the matter with the DOJ Civil Division for $ 12.6 million, plus certain statutory fees, which was recorded in selling, general and administrative expense during the six months ended June 30, 2021.

In the ordinary course of our business, we may become involved in lawsuits, proceedings, and other disputes, including commercial, intellectual property, regulatory, employment, and other matters.

We record a reserve for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We 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 agreements, we may be required to pay upfront fees, milestone payments, and royalties on sales of future products.

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

What changed 10-Q

Item 1. Financial Statements