What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-08-03 · 176 added, 150 removed, 699 unchanged (32% of the section changed)

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

The following discussion of our financial condition and results of operations as of and for the three and six months ended June 30, 2021 should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020 previously filed with the SEC.

The following discussion of our financial condition and results of operations as of and for the three and nine months ended September 30, 2021 should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020 previously filed with the SEC.

Forward-Looking Statements

3 unchanged sentences

These forward-looking statements include statements as to:

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

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

77 unchanged sentences

In this report all references to “Incyte,” “we,” “us,” “our” or the “Company” mean Incyte Corporation and our subsidiaries, except where it is made clear that the term means only the parent company.

Incyte, JAKAFI and PEMAZYRE are our registered trademarks.

Incyte, JAKAFI and PEMAZYRE are our registered trademarks and OPZELURA is our trademark.

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

34 unchanged sentences

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

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

● Our marketable securities and long term investments are subject to risks that could adversely affect our overall financial position, and tax law changes could adversely affect our results of operations and financial condition.

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

13 unchanged sentences

Hematology and Oncology

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

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

JAKAFI (ruxolitinib)

1 unchanged sentence

It was approved by the U.S.

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

Food and Drug Administration (FDA) in November 2011 for the treatment of adults with intermediate or high-risk myelofibrosis (MF), in December 2014 for the treatment of adults with polycythemia vera (PV) who have had an inadequate response to or are intolerant of hydroxyurea, in May 2019 for the treatment of steroid-refractory acute graft-versus-host disease (GVHD) in adult and pediatric patients 12 years and older and in September 2021 for the treatment of chronic GVHD after failure of one or two lines of systemic therapy in adult and pediatric patients 12 years and older .

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

63 unchanged sentences

The most frequently reported adverse reactions among all study participants were infections (55%) and edema (51%), and the most common laboratory abnormalities were anemia (75%), thrombocytopenia (75%) and neutropenia (58%).

In September 2021, the FDA approved JAKAFI for the treatment of chronic GVHD after failure of one or two lines of systemic therapy in adult and pediatric patients 12 years and older.

This approval was based on data from REACH3, a Phase III, randomized, open-label, multicenter study of JAKAFI in comparison to best available therapy for treatment of steroid-refractory chronic GVHD after allogeneic stem cell transplantation.

The overall response rate through Cycle 7 Day 1 was 70% for Jakafi compared to 57% for best available therapy.

The most common hematologic adverse reactions (incidence > 35%) were anemia and thrombocytopenia.

The most common nonhematologic adverse reactions (incidence ≥ 20%) were infections (pathogen not specified) and viral infection.

In addition, the FDA updated labeling for JAKAFI to include warnings of increased risk of major adverse cardiovascular events, thrombosis, and secondary malignancies related to another JAK-inhibitor treating rheumatoid arthritis, a condition for which Jakafi is not indicated.

In patients with MF and PV treated with Jakafi in clinical trials, the rates of thromboembolic events were similar in Jakafi and control treated patients.

We have retained all development and commercialization rights to JAKAFI in the United States and are eligible to receive development and sales milestones as well as royalties from product sales outside the United States.

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

MONJUVI (tafasitamab-cxix)

MONJUVI (tafasitamab-cxix) / MINJUVI (tafasitamab)

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

4 unchanged sentences

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

In August 2020, we and MorphoSys announced that MONJUVI in combination with lenalidomide had been included in the latest National Comprehensive Cancer Network (NCCN) Clinical Practice Guidelines in Oncology for B-cell Lymphomas.

DLBCL is the most common type of non-Hodgkin lymphoma in adults worldwide, comprising 40% of all cases.

DLBCL is characterized by rapidly growing masses of malignant B-cells in the lymph nodes, spleen, liver, bone marrow or other organs.

It is an aggressive disease with ~40% of patients not responding to initial therapy or relapsing thereafter.

We estimate that there are ~10,000 patients diagnosed in the United States each year with relapsed or refractory diffuse large B-cell lymphoma (r/r DLBCL) who are not eligible for ASCT.

In the EU, we estimate there are ~14,000 patients diagnosed each year with r/r DLBCL who are not eligible for ASCT.

The approval of MONJUVI was based on data from the MorphoSys-sponsored Phase II L-MIND study, an open label, multicenter, single arm trial of MONJUVI in combination with lenalidomide as a treatment for adult patients with r/r DLBCL.

4 unchanged sentences

Updated three-year data from L-MIND were presented at the American Society of Clinical Oncology (ASCO) 2021.

In August 2021, we and MorphoSys announced that the European Commission (EC) 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 autologous stem cell transplant (ASCT).

The conditional approval is based on the three-year results from the L-MIND study evaluating the safety and efficacy of MINJUVI in combination with lenalidomide as a treatment for patients with r/r DLBCL who are not eligible for ASCT.

The results showed best objective response rate (ORR) of 56.8% (primary endpoint), including a complete response (CR) rate of 39.5% and a partial response rate (PR) of 17.3%, as assessed by an independent review committee.

The median duration of response (mDOR) was 43.9 months after a minimum follow up of 35 months (secondary endpoint).

MINJUVI together with lenalidomide was shown to provide a clinically meaningful response and the side effects were manageable.

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

DLBCL is the most common type of non-Hodgkin lymphoma in adults worldwide, comprising 40% of all cases.

DLBCL is characterized by rapidly growing masses of malignant B-cells in the lymph nodes, spleen, liver, bone marrow or other organs.

It is an aggressive disease with ~40% of patients not responding to initial therapy or relapsing thereafter.

We estimate that there are ~10,000 patients diagnosed in the United States each year with r/r DLBCL who are not eligible for ASCT.

In the EU, we estimate there are ~14,000 patients diagnosed each year with r/r DLBCL who are not eligible for ASCT.

PEMAZYRE (pemigatinib)

4 unchanged sentences

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

In June 2021, PEMAZYRE was approved in Taiwan for the treatment of adults with previously treated, unresectable locally advanced or metastatic cholangiocarcinoma with a fibroblast growth factor receptor 2 (FGFR2) fusion gene.

In July 2021, the UK’s National Institute for Health and Care Excellence (NICE) recommended PEMAZYRE for patients with cholangiocarcinoma with a fibroblast growth factor receptor 2 (FGFR2) fusion or rearrangement that have progressed after at least one prior line of systemic therapy.

20 unchanged sentences

Ruxolitinib and itacitinib

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

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

No new safety signals were observed, and the ruxolitinib safety profile in REACH2 was consistent with that seen in previously reported studies in steroid-refractory acute GVHD.

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

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

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

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

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

In June 2021, we announced that the FDA extended the PDUFA action date by three months to allow time to review additional data submitted by us in response to the FDA’s information request.

In July 2021, we and Novartis announced that data from REACH3 were published in the New England Journal of Medicine.

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

Itacitinib is being evaluated in GRAVITAS-309, a pivotal Phase III trial of itacitinib in patients with steroid-naïve chronic GVHD.

The FDA has granted itacitinib orphan drug status for GVHD.

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

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

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

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

Itacitinib is a selective JAK1 inhibitor being evaluated in GRAVITAS-309, a pivotal Phase III trial of itacitinib in patients with steroid-naïve chronic GVHD.

The FDA has granted itacitinib orphan drug status for GVHD.

In September 2021, we and Syndax Pharmaceuticals, Inc.

announced an exclusive worldwide collaboration and license agreement to develop and commercialize axatilimab, Syndax’s anti-CSF-1R monoclonal antibody, pending regulatory clearance.

Together, we plan to develop axatilimab as a therapy for patients with chronic GVHD as well as in additional immune-mediated diseases where CSF-1R-dependent monocytes and macrophages are believed to contribute to organ fibrosis.

The global pivotal Phase II AGAVE-201 trial of axatilimab monotherapy in patients with chronic GVHD in the third line setting is ongoing.

Additional trials of axatilimab are planned in patients with chronic GVHD, including a Phase II trial in combination with a JAK inhibitor in patients with steroid-refractory cGVHD.

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

1 unchanged sentence

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

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

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

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

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

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

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

In June 2021, we and MorphoSys announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion recommending the conditional marketing authorization of tafasitamab in combination with lenalidomide, followed by tafasitamab monotherapy, for the treatment of patients with relapsed or refractory DLBCL who are not eligible for autologous stem cell transplantation (ASCT).

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

1 unchanged sentence

We initiated the FIGHT clinical program to evaluate pemigatinib across a spectrum of cancers that are driven by FGF/FGFR alterations.

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

Based on data generated from these ongoing trials, we have initiated additional trials.

4 unchanged sentences

Parsaclisib is a PI3Kδ inhibitor that has demonstrated potency and selectivity in preclinical studies and has potential therapeutic utility in the treatment of patients with lymphoma.

We initiated the CITADEL clinical program to evaluate parsaclisib in non-Hodgkin lymphomas, and we are currently running Phase II trials in follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma.

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

1 unchanged sentence

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

In October 2021, we announced the FDA acceptance of a NDA seeking approval of parsaclisib for the treatment of patients with relapsed or refractory follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma.

The submission is based on data from several Phase 2 studies (CITADEL-203, -204 and -205) evaluating parsaclisib as a treatment for relapsed or refractory NHLs (follicular, marginal zone and mantle cell).

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

In June 2021, Phase II data evaluating parsaclisib in AIHA were presented at EHA.

The majority of patients achieved a response with parsaclisib over the initial 12-week treatment period.

Treatment with parsaclisib was generally well tolerated.

Based on these results, we expect to initiate a Phase III trial in warm AIHA.

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

In October 2017, we and MacroGenics, Inc.

2 unchanged sentences

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

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

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

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

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

In July 2021, we announced that the FDA issued a complete response letter (CRL) for the BLA of retifanlimab for the treatment of squamous cell carcinoma of the anal canal.

In July 2021, we announced that the FDA issued a complete response letter (CRL) for the BLA of retifanlimab for the treatment of squamous cell carcinoma of the anal canal (SCAC).

In October 2021, we announced that we withdrew the Marketing Authorization Application (MAA) seeking approval of retifanlimab in SCAC.

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

2 unchanged sentences

Indication and status

ruxolitinib (JAK1/JAK2)

Steroid-refractory chronic GVHD 1 :

sNDA under review

itacitinib (JAK1)

Treatment-naïve chronic GVHD:

Phase III (GRAVITAS-309)

Once-a-day ruxolitinib (JAK1/JAK2)

15 unchanged sentences

Phase II in preparation

itacitinib (JAK1)

Myelofibrosis:

Phase II (second-line therapy)

ruxolitinib + CK0804 1

2 unchanged sentences

PoC in preparation

itacitinib (JAK1)

Treatment-naïve chronic GVHD:

Phase III (GRAVITAS-309)

axatilimab (anti-CSF-1R) 2

Chronic GVHD:

Phase II (third-line therapy) (AGAVE-201)

Phase II (L-MIND);

Phase III (B-MIND)

CHMP+ opinion;

NDS under review

Phase Ib (firstMIND);

5 unchanged sentences

r/r B-cell malignancies:

PoC with parsaclisib (PI3Kδ) (topMIND) in preparation

PoC with parsaclisib (PI3Kδ) (topMIND)

r/r B-cell malignancies:

PoC with lenalidomide and plamotamab in preparation 4

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

Phase III (FIGHT-302)

Myeloid/lymphoid neoplasms (MLN):

15 unchanged sentences

Phase III (CITADEL-310) in preparation

Autoimmune hemolytic anemia:

Phase III in preparation

Phase II (POD1UM-202);

Phase III (PODIUM-303)

CRL from FDA;

MAA under review

MSI-high endometrial cancer:

3 unchanged sentences

Phase III (POD1UM-304)

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

Development collaboration with Cellenkos, Inc.

axatilimab development in collaboration with Syndax, pending regulatory clearance.

tafasitamab development in collaboration with MorphoSys.

6 unchanged sentences

Small molecules

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

INCB81776 (AXL/MER), epacadostat (IDO1), INCB86550 (PD-L1), INCB99280 (PD-L1), INCB99318 (PD-L1), INCB106385 (A2A/A 2B )

Monoclonal antibodies 1

2 unchanged sentences

MCLA-145 (PD-L1xCD137) 2

INCB01158 development in collaboration with Calithera Biosciences, Inc.

Discovery collaboration with Agenus Inc.

1 unchanged sentence

Inflammation and AutoImmunity (IAI)

We do not yet have any approved products in IAI.

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

Clinical Programs in Dermatology

Ruxolitinib cream is a potent, selective inhibitor of JAK1 and JAK2 that provides the opportunity to directly target diverse pathogenic pathways that underlie certain dermatologic conditions, including atopic dermatitis and vitiligo.

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

both trials met their primary endpoints.

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

Updated 52-week data from both trials were presented at the RAD virtual symposium in June 2021.

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

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

In June 2021, the FDA extended the PDUFA action date to September 2021 to allow time to review additional subgroup analyses of data we submitted in response to the FDA’s information request.

We recently established Incyte Dermatology as a new commercial franchise, which launched its first approved product, OPZELURA (ruxolitinib) cream, in October 2021, following FDA approval in September 2021.

Incyte’s IAI efforts also include numerous clinical development programs.

OPZELURA (ruxolitinib) cream

In September 2021, we announced that the FDA approved OPZELURA (ruxolitinib) cream, a novel cream formulation of Incyte’s selective JAK1/JAK2 inhibitor ruxolitinib, for the topical short-term and non-continuous chronic treatment of mild to moderate atopic dermatitis (AD) in non-immunocompromised patients 12 years of age and older whose disease is not adequately controlled with topical prescription therapies, or when those therapies are not advisable.

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

1 unchanged sentence

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

The approval of OPZELURA was based on data from two randomized, double-blind, vehicle-controlled Phase III studies (TRuE-AD1 and TRuE-AD 2) evaluating the safety and efficacy of OPZELURA in adolescents and adults with mild to moderate AD.

Significantly more patients treated with OPZELURA achieved Investigator’s Global Assessment (IGA) Treatment Success at Week 8 (defined as an IGA score of 0 or 1 with at least a 2-point improvement from baseline, the primary endpoint:

53.8% in TRuE-AD1 and 51.3% in TRuE-AD2, compared to vehicle (15.1% in TRuE-AD1, 7.6% in TRuE-AD2;

Significantly more patients treated with OPZELURA experienced a clinically meaningful reduction in itch from baseline at Week 8, as measured by a ≥4-point reduction in the itch Numerical Rating Scale (itch NRS4):

52.2% in TRuE-AD1 and 50.7% in TRuE-AD2, compared to vehicle (15.4% in TRuE-AD1, 16.3% in TRuE-AD2;

P<0.0001), among patients with an NRS score of at least 4 at baseline.

The most common (≥1%) treatment-emergent adverse reactions in patients treated with OPZELURA were nasopharyngitis, diarrhea, bronchitis, ear infection, eosinophil count increased, urticaria, folliculitis, tonsillitis and rhinorrhea.

Clinical Programs in Dermatology

We are currently evaluating ruxolitinib cream in a Phase III trial, TRuE-AD3, in pediatric atopic dermatitis patients ages ≥2 years to < 12 years.

In May 2021, we announced positive topline results from the Phase III TRuE-V program evaluating ruxolitinib cream as a treatment for adolescent and adult patients with vitiligo.

Both TRuE-V1 and TRuE-V2 studies met the primary and key secondary endpoints, including patient reported outcomes.

Both TRuE-V1 and TRuE-V2 studies met the primary

and key secondary endpoints, including patient reported outcomes.

The overall efficacy and safety profile of ruxolitinib cream was consistent with previously reported Phase II data, and no new safety signals were observed.

In October 2021, data from the Week 24 analysis of the Phase III TRuE-V program were presented at the European Academy of Dermatology and Venereology Congress (EADV).

Treatment with 1.5% ruxolitinib cream twice daily (BID) resulted in greater improvement versus vehicle for the primary and all key secondary endpoints in both the TRuE-V1 and TRuE-V2 studies.

Results, which were consistent across both studies, showed that 29.9% of patients applying ruxolitinib cream achieved ≥75% improvement from baseline in the facial Vitiligo Area Scoring Index (F-VASI75), the primary endpoint.

The overall safety profile of ruxolitinib cream in vitiligo was consistent with previous study data.

In the TRuE-V studies, patients using ruxolitinib cream did not report clinically significant application site reactions.

Treatment-emergent adverse events were consistent with previous studies, with no serious treatment-related adverse events reported.

In October 2021, we announced the validation of the European Marketing Authorization Application (MAA) for ruxolitinib cream as a potential treatment for adolescents and adults (age >12 years) with non-segmental vitiligo with facial involvement.

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

5 unchanged sentences

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

A Phase II trial evaluating INCB54707 in patients with prurigo nodularis is ongoing.

Clinical Programs in Other IAI

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

In June 2021, Phase II data evaluating parsaclisib in AIHA were presented at EHA.

The majority of patients achieved a response with parsaclisib over the initial 12-week treatment period.

Treatment with parsaclisib was generally well tolerated.

Based on these results, we expect to initiate a Phase III trial.

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

A Phase II trial of INCB00928 is in preparation for patients with fibrodysplasia ossificans progressiva (FOP), a disorder in which muscle tissue and connective tissue are gradually replaced by bone.

3 unchanged sentences

Atopic dermatitis:

NDA under review;

Phase III pediatric study ongoing (TRuE-AD3)

1 unchanged sentence

primary endpoint met in both studies);

sNDA in preparation

sNDA and MAA in progress

INCB54707 (JAK1)

Hidradenitis suppurativa:

parsaclisib (PI3Kδ)

Autoimmune hemolytic anemia:

Phase III in preparation

Prurigo nodularis:

INCB00928 (ALK2)

29 unchanged sentences

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

In July 2021, we and Lilly announced that the FDA will not meet the PDUFA action date for the sNDA for baricitinib for the treatment of adults with moderate to severe AD due to the FDA's ongoing assessment of JAK inhibitors.

In July 2021, we and Lilly announced that the FDA will not meet the PDUFA action date for

the sNDA for baricitinib for the treatment of adults with moderate to severe AD due to the FDA's ongoing assessment of JAK inhibitors.

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

13 unchanged sentences

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

In September 2021, we and Lilly announced detailed results from BRAVE-AA1 and BRAVE-AA2 at the European Academy of Dermatology and Venereology Congress (EADV).

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

12 unchanged sentences

In patients taking TABRECTA, the study also demonstrated a median duration of response of 12.6 months in treatment-naive patients (19 responders) and 9.7 months in previously treated patients (28 responders).

The most common treatment-related adverse events (AEs) (incidence ≥20%) are peripheral edema, nausea, fatigue, vomiting, dyspnea, and decreased appetite.

The most common treatment-related adverse events (AEs) (incidence ≥20%) are peripheral edema, nausea, fatigue, vomiting,

dyspnea, and decreased appetite.

In September 2020, we and Novartis announced that GEOMETRY mono-1 results were published in The New England Journal of Medicine.

31 unchanged sentences

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

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

Under the terms of the agreement, Lilly received exclusive worldwide development and commercialization rights to baricitinib

and certain back up compounds for inflammatory and autoimmune diseases.

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

3 unchanged sentences

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

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

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

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

In August 2021, we entered into a Collaboration and License Agreement with a subsidiary of InnoCare Pharma Limited.

Under the terms of this agreement, InnoCare’s subsidiary received development and exclusive commercialization rights to tafasitamab in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan.

In-License Agreements

3 unchanged sentences

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

In addition to the initial four program targets, we and Agenus have the option to jointly nominate

and pursue additional targets within the framework of the collaboration, and in November 2015, three more targets were added, two of which were removed from the collaboration under the February 2017 amendments.

In addition to the initial four program targets, we and Agenus have the option to jointly nominate and pursue additional targets within the framework of the collaboration, and in November 2015, three more targets were added, two of which were removed from the collaboration under the February 2017 amendments.

Takeda (ARIAD)

17 unchanged sentences

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

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

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

In September 2021, we entered into a Collaboration and License Agreement with Syndax covering the worldwide development and commercialization of SNDX-6352 (axatilimab), Syndax’s anti-CSF-1R monoclonal antibody.

Effectiveness of this agreement is subject to termination of the Hart-Scott-Rodino Antitrust Improvements Act waiting period.

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

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

5 unchanged sentences

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

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

The RUXCOVID study has been completed and the data will be further analyzed to determine any potential impact on

other studies of ruxolitinib in patients with COVID-19, including our Expanded Access Program in the United States, which allows eligible patients with severe COVID-19 associated cytokine storm to receive ruxolitinib.

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

12 unchanged sentences

In August 2021, we and Lilly announced new data from an additional cohort of 101 adult patients from the COV-BARRIER trial.

In this sub-study, patients with COVID-19 on mechanical

ventilation or extracorporeal membrane oxygenation (ECMO) who received baricitinib plus standard of care were 46% less likely to die by Day 28 compared to patients who received placebo plus standard of care.

In this sub-study, patients with COVID-19 on mechanical ventilation or extracorporeal membrane oxygenation (ECMO) who received baricitinib plus standard of care were 46% less likely to die by Day 28 compared to patients who received placebo plus standard of care.

Critical Accounting Policies and Significant Estimates

7 unchanged sentences

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

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

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

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

5 unchanged sentences

Product Revenues

Our product revenues consist of sales of JAKAFI, PEMAZYRE and ICLUSIG.

Our product revenues consist of sales of JAKAFI, PEMAZYRE, ICLUSIG, and MINJUVI.

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

15 unchanged sentences

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

In addition to actual chargebacks received, we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on

hand in our distribution channel.

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

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

27 unchanged sentences

We assess the probability of achievement of performance conditions, including projected product revenues and clinical development milestones, as of the end of each reporting period.

Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to

date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting.

Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting.

Income Taxes.

5 unchanged sentences

Significant judgment is required in making this assessment and, to the extent that a reversal of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be recognized against our income tax provision in the period of such reversal.

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.

based on the technical merits of the position.

The tax benefit that is recorded for these positions is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

13 unchanged sentences

Results of Operations

We recorded net income of $149.5 million and basic net income per share of $0.68 and diluted net income per share of $0.67 for the three months ended June 30, 2021, as compared to net income of $290.3 million and basic net income per share of $1.33 and diluted net income per share of $1.32 in the corresponding period in 2020.

We recorded net income of $203.0 million and basic net income per share of $0.92 and diluted net income per share of $0.91 for the six months

ended June 30, 2021, as compared to net loss of $430.3 million and basic and diluted net loss per share of $1.98 in the corresponding period in 2020.

We recorded net income of $181.7 million and basic and diluted net income per share of $0.82 for the three months ended September 30, 2021, as compared to net loss of $15.2 million and basic and diluted net loss per share of $0.07 in the corresponding period in 2020.

We recorded net income of $384.7 million and basic net income per share of $1.75 and diluted net income per share of $1.73 for the nine months ended September 30, 2021, as compared to net loss of $445.5 million and basic and diluted net loss per share of $2.05 in the corresponding period in 2020.

For the Three Months Ended,

For the Six Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

3 unchanged sentences

PEMAZYRE revenues, net

MINJUVI revenues, net

Total product revenues, net

5 unchanged sentences

Total revenues

The increase in JAKAFI product revenues for the three months ended June 30, 2021 as compared to the corresponding period in 2020 was comprised of a volume increase of $31.7 million and a price increase of $23.7 million.

The increase in JAKAFI product revenues for the six months ended June 30, 2021 as compared to the corresponding period in 2020 was comprised of a volume increase of $25.8 million and a price increase of $35.8 million.

The increase in JAKAFI product revenues for the three months ended September 30, 2021 as compared to the corresponding period in 2020 was comprised of a volume increase of $41.4 million and a price increase of $18.2 million.

The increase in JAKAFI product revenues for the nine months ended September 30, 2021 as compared to the corresponding period in 2020 was comprised of a volume increase of $66.4 million and a price increase of $54.7 million.

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

3 unchanged sentences

Discounts and

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Balance at January 1, 2021

3 unchanged sentences

Credits/payments for prior period sales

Balance at June 30, 2021

Balance at September 30, 2021

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

2 unchanged sentences

We adjust our estimates for government rebates and chargebacks based on new information regarding actual rebates as it becomes available.

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

the new information becomes available.

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

2 unchanged sentences

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

Our milestone and contract revenues for the six months ended June 30, 2021, were derived from a $10.0 million milestone under the Innovent research and collaboration and licensing agreement.

Our milestone and contract revenues for the six months ended June 30, 2020, were derived from a $5.0 million milestone under the Innovent research collaboration and licensing agreement and $90.0 million in milestones under the Novartis collaboration and license agreement.

Our milestone and contract revenues for the nine months ended September 30, 2021, were derived from a $10.0 million milestone under the Innovent research and collaboration and licensing agreement and a $35.0 million upfront payment under the InnoCare collaboration and license agreement.

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

Cost of Product Revenues.

For the Three Months Ended,

For the Six Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

6 unchanged sentences

Total cost of product revenues

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

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

Operating Expenses.

1 unchanged sentence

For the Three Months Ended,

For the Six Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

6 unchanged sentences

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

The increase in salary and benefits related expense for the three and six months ended June 30, 2021 as compared to the corresponding periods in 2020 was due primarily to increased development headcount to sustain our development pipeline.

The increase in salary and benefits related expense for the three and nine months ended September 30, 2021 as compared to the corresponding periods in 2020 was due primarily to increased development headcount to sustain our development pipeline.

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

The increase in clinical research and outside services expense for the three months ended June 30, 2021 as compared to the corresponding period in 2020 was primarily due to the progression of our pipeline including parsaclisib and our 55% share of the global and U.S.

specific development costs for tafasitamab as well as product supply related costs to support the potential launch of ruxolitinib cream as a treatment for atopic dermatitis.

The decrease in clinical research and outside services expense for the six months ended June 30, 2021 as compared to the corresponding period in 2020 was primarily due to upfront consideration related to our collaborative agreement with MorphoSys recorded during 2020.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $5.0 million and $16.5 million, respectively, for the three and six months ended June 30, 2021.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $3.5 million and $809.0 million, respectively, for the three and six months ended June 30, 2020.

Research and development expenses for the three and six months ended June 30, 2021 and 2020 were net of $8.9 million, $12.5 million, $3.2 million and $4.9 million, respectively, of costs reimbursed by our collaborative partners.

The decrease in clinical research and outside services expense for the three months ended September 30, 2021 as compared to the corresponding period in 2020 was primarily due to expense related to the purchase of an FDA priority

review voucher in the prior year that enabled OPZELURA to be the first JAK inhibitor approved in a topical formulation, and the decrease in such expense for the nine months ended September 30, 2021 as compared to the corresponding period in 2020 was also due to upfront consideration related to our collaborative agreements recorded in the 2020 period.

Research and development expenses include upfront and milestone expenses related to our collaborative agreements of $4.3 million and $20.8 million, respectively, for the three and nine months ended September 30, 2021.

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

Research and development expenses for the three and nine months ended September 30, 2021 and 2020 were net of $3.2 million, $15.7 million, $2.1 million and $7.0 million, respectively, of costs reimbursed by our collaborative partners.

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

4 unchanged sentences

For the Three Months Ended,

For the Six Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

4 unchanged sentences

Total selling, general and administrative expenses

The increase in salary and benefits related expense for the three and six months ended June 30, 2021 as compared to the corresponding period in 2020 was due primarily to increased headcount.

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

The increase in salary and benefits related expense for the three and nine months ended September 30, 2021 as compared to the corresponding period in 2020 was due primarily to increased headcount.

The increase in other contract services and outside costs for the three and six months ended June 30, 2021, as compared to the corresponding period in 2020, was due primarily to expenses related to the establishment of our dermatology commercial organization and expenses related to activities to support the potential launch of ruxolitinib cream for the treatment of atopic dermatitis.

The six months ended June 30, 2021 also included expense recognized in connection with a legal settlement, as discussed in Note 15 of notes to our condensed consolidated financial statements.

The increase in other contract services and outside costs for the three and nine months ended September 30, 2021, as compared to the corresponding period in 2020, was due primarily to expenses related to the establishment of our dermatology commercial organization and expenses related to activities to support the potential launch of ruxolitinib cream for the treatment of atopic dermatitis.

The nine months ended September 30, 2021 also included expense recognized in connection with a legal settlement, as discussed in Note 15 of notes to our condensed consolidated financial statements.

Change in fair value of acquisition-related contingent consideration

1 unchanged sentence

The fair value of the acquisition-related contingent consideration is remeasured quarterly.

The change in fair value of the acquisition-related contingent consideration for the three and six months ended June 30, 2021 was $4.6 million and $10.2 million, respectively, which is recorded in change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value of the acquisition-related contingent consideration for the three and six months ended June 30, 2020 was $6.1 million and $12.7

million, respectively, which is recorded in change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value for the three and six months ended June 30, 2021 and 2020 was due primarily to the passage of time as there were no other significant changes in the key assumptions during the periods.

The change in fair value of the acquisition-related contingent consideration for the three and nine months ended September 30, 2021 was $2.9 million and $13.1 million, respectively, which is recorded in change in fair value of acquisition-related contingent consideration on the condensed consolidated statements of operations.

The change in fair value of the acquisition-related contingent consideration for the three and nine months ended September 30, 2020 was $7.1 million and $19.8 million, respectively, which is recorded in change in fair value of acquisition-related contingent

consideration on the condensed consolidated statements of operations.

The change in fair value for the three and nine months ended September 30, 2021 and 2020 was due primarily to the impact of updated projections of future ICLUSIG revenues in the European Union.

Collaboration loss sharing

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

For the three and six months ended June 30, 2021, our 50% share of the losses for tafasitamab was $9.8 million and $20.3 million, respectively, as recorded in collaboration loss sharing on the condensed consolidated statement of operations.

For the three and six months ended June 30, 2020, our 50% share of the losses for tafasitamab was $13.3 million and $15.4 million, respectively, as recorded in collaboration loss sharing on the condensed consolidated statement of operations.

For the three and nine months ended September 30, 2021, our 50% share of the losses for tafasitamab was $9.1 million and $29.5 million, respectively, as recorded in collaboration loss sharing on the condensed consolidated statement of operations.

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

Other income (expense).

Other income (expense), net.

Other income (expense), net for the three and six months ended June 30, 2021 was $4.4 million and $3.0 million, respectively.

Other income (expense), net for the three and six months ended June 30, 2020 was $4.8 million and $13.5 million, respectively.

The decrease in other income (expense), net for the six months ended June 30, 2021 primarily relates to a decrease in interest income.

Other income (expense), net for the three and nine months ended September 30, 2021 was $1.9 million and $4.9 million, respectively.

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

The decrease in other income (expense), net for the nine months ended September 30, 2021 primarily relates to a decrease in interest income.

Interest expense.

Interest expense for the three and six months ended June 30, 2021 was $0.4 million and $0.7 million, respectively.

Interest expense for the three and six months ended June 30, 2020 was $0.6 million and $1.2 million, respectively.

Included in interest expense for the three and six months ended June 30, 2021 was approximately $0.3 million and $0.6 million, respectively, of interest expense on our finance lease liabilities.

Included in interest expense for the three and six months ended June 30, 2020 was $0.2 million and $0.4 million, respectively, of non-cash charges to amortize the discount on our convertible senior notes due November 2020 and approximately $0.3 million and $0.6 million, respectively, of interest expense on our finance lease liabilities.

Interest expense for the three and nine months ended September 30, 2021 was $0.4 million and $1.2 million, respectively.

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

Included in interest expense for the three and nine months ended September 30, 2021 was approximately $0.4 million and $1.0 million, respectively, of interest expense on our finance lease liabilities.

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

Unrealized gain (loss) on long term investments.

2 unchanged sentences

For the Three Months Ended,

For the Six Months Ended,

For the Nine Months Ended,

September 30,

(in millions)

2 unchanged sentences

Provision for income taxes.

The provision for income taxes for the three and six months ended June 30, 2021 was $22.2 million and $38.0 million, respectively.

The provision for income taxes for the three and six months ended June 30, 2020 and was $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.

The provision for income taxes for the three and nine months ended September 30, 2021 was $27.7 million and $65.7 million, respectively.

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

The 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.

Liquidity and Capital Resources

Due to historical net losses, we had an accumulated deficit of $1.5 billion as of June 30, 2021.

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

At June 30, 2021, we had available cash, cash equivalents and marketable securities of $2.1 billion.

Due to historical net losses, we had an accumulated deficit of $1.3 billion as of September 30, 2021.

We have funded our research and development operations through cash received from customers, sales of equity securities, the

issuance of convertible notes, and collaborative arrangements.

At September 30, 2021, we had available cash, cash equivalents and marketable securities of $2.3 billion.

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

1 unchanged sentence

Available cash is invested in accordance with our investment policy’s primary objectives of liquidity, safety of principal and diversity of investments.

Net cash provided by operating activities for the six months ended June 30, 2021 was $379.0 million and net cash used in operating activities for the six months ended June 30, 2020 was $414.0 million.

The $793.0 million increase in cash provided by operating activities was due primarily to cash outflows in March 2020 related to our collaboration and license agreement with MorphoSys and changes in working capital.

Net cash provided by operating activities for the nine months ended September 30, 2021 was $634.1 million and net cash used in operating activities for the nine months ended September 30, 2020 was $231.9 million.

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

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

Net cash used by investing activities was $108.9 million for the six months ended June 30, 2021, which represented purchases of marketable securities of $102.3 million, capital expenditures of $114.4 million and purchases of long term equity investments of $8.7 million, offset in part by the sale of long term investment of $9.3 million and the sale and maturities of marketable securities of $107.1 million.

Net cash used in investing activities was $151.8 million for the six months ended June 30, 2020, which represented purchases of marketable securities of $287.4 million, capital expenditures of $83.1 million, and purchases of long term equity investments of $95.5 million, offset in part by the sale of long term investment of $4.5 million and the sales and maturities of marketable securities of $309.7 million.

Net cash used by investing activities was $141.7 million for the nine months ended September 30, 2021, which represented purchases of marketable securities of $228.2 million, capital expenditures of $146.5 million and purchases of long term equity investments of $8.7 million, offset in part by the sale of long term investment of $10.5 million and the sale and maturities of marketable securities of $231.3 million.

Net cash used in investing activities was $166.3 million for the nine months ended September 30, 2020, which represented purchases of marketable securities of $418.7 million, capital expenditures of $135.9 million, and purchases of long term equity investments of $95.5 million, offset in part by the sale of long term investment of $17.3 million and the sales and maturities of marketable securities of $466.6 million.

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

Net cash provided by financing activities was $16.5 million and $58.9 million, respectively, for the six months ended June 30, 2021 and 2020, primarily representing proceeds from the issuance of common stock under our stock plans, offset in part by cash paid to ARIAD/Takeda for contingent consideration.

Net cash used in financing activities was $2.8 million for the nine months ended September 30, 2021 and net cash provided by financing activities was $59.8 million for the nine months ended September 30, 2020, primarily representing proceeds from the issuance of common stock under our stock plans net of tax withholding, offset by cash paid to ARIAD/Takeda for contingent consideration.

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

1 unchanged sentence

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

We believe that our cash flow from operations, together with our cash, cash equivalents and marketable securities, will be adequate to satisfy our capital needs for the foreseeable future.

In August 2021, we entered into a $500.0 million, three-year senior unsecured revolving credit facility.

We may increase the maximum revolving commitments or add one or more incremental term loan facilities, subject to obtaining commitments from any participating lenders and certain other conditions, in an amount not to exceed $250.0 million plus a contingent additional amount that is dependent on our pro forma consolidated leverage ratio.

As of September 30, 2021, we had no outstanding borrowings and were in compliance with all covenants under this facility.

We believe that our cash flow from operations, together with our cash, cash equivalents and marketable securities and funds available under our revolving credit facility, will be adequate to satisfy our capital needs for the foreseeable future.

Our cash requirements depend on numerous factors, including our expenditures in connection with our drug discovery and development programs and commercialization operations;

6 unchanged sentences

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

The sale of equity or convertible debt securities in the future may be dilutive to our stockholders, and may provide for rights, preferences or privileges senior to those of our holders of common stock.

The sale of equity or convertible debt securities in the future may be dilutive to our stockholders, and may provide for rights, preferences or privileges senior to those of our holders of common

Debt financing arrangements may require us to pledge certain assets or enter into covenants that could restrict our operations or our ability to incur further indebtedness.

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis