What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-10 compared with 2024-02-13 · 320 added, 208 removed, 1006 unchanged (34% of the section changed)

26 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowances for rebates owed pursuant to the Medicaid Drug Rebate Program in the U.S.

11 unchanged sentences

In addition, we involved our governmental pricing specialists to assist in evaluating management’s methodology and calculations used to measure the estimated rebates.

Evaluating the fair value of the in-process research and development assets acquired in the Escient Pharmaceutics, Inc.

Description of the Matter As described in Note 5 to the consolidated financial statements, on May 30, 2024, the Company acquired all of the outstanding shares of common stock of Escient Pharmaceuticals, Inc.

(“Escient”), a clinical-stage drug development company, for $782.5 million in cash consideration.

The Company determined substantially all of the fair value of the gross assets acquired was concentrated in Escient’s lead clinical-stage molecule, EP262.

Therefore, the Company accounted for the Escient transaction as an asset acquisition under U.S.

The acquired in-process research and development asset for EP262 was valued at $644.8 million, with an additional $34.6 million of fair value allocated to the secondary molecule, EP547.

As both acquired in-process research and development assets do not have an alternative future use at the acquisition date, the Company recognized the full amount of $679.4 million as research and development expenses.

Auditing the Company’s fair value of the in-process research and development assets acquired in the Escient transaction was judgmental due to the significant estimation uncertainty and subjectivity of the significant assumptions used by management in determining the present value of future discounted cash flows.

The significant assumptions used in the calculation of the fair value of the in-process research and development assets of Escient included the amount of future product revenues, the probability of success, and the discount rate.

The fair value calculation of the in-process research and development assets are sensitive to these significant assumptions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s review of the estimation of the fair value of the in-process research and development assets of Escient.

For example, we tested controls over management’s review of the significant assumptions, such as the amount of future product revenues, the probability of success, and the discount rate, and over the completeness and accuracy of the data used in the valuation.

To test the fair value of the in-process research and development assets, we performed audit procedures that included, among others, evaluating the Company's methodologies used and testing the significant assumptions discussed above.

For example, we compared the significant assumptions used by management to current published scientific studies, industry, market and economic trends, and to other relevant factors.

In addition, to evaluate the probability of success, we considered the phase of development of the in-process research and development assets against third-party data regarding clinical trial success rates.

We also performed various sensitivity analyses of the significant assumptions to evaluate the change in the fair value of the in-process research and development assets resulting from changes in the assumptions.

In addition, we involved our valuation specialists to assist in our evaluation of the methodologies and the discount rates used in the fair value estimate.

/s/ Ernst & Young LLP

15 unchanged sentences

Restricted cash 1,622 1,845

Long term investments 187,716 133,676

Long term equity investments 18,814 187,716

Inventory 348,327 206,965

27 unchanged sentences

Additional paid-in capital 4,533,437 5,016,122

Accumulated other comprehensive income 13,106 15,069

Retained earnings (accumulated deficit) 160,385 ( 437,214 )

Accumulated other comprehensive (loss) income ( 13,121 ) 13,106

(Accumulated deficit) retained earnings ( 1,072,881 ) 160,385

Total stockholders’ equity 3,447,628 5,189,837

10 unchanged sentences

Total revenues 4,241,217 3,695,649 3,394,635

Costs and expenses:

Costs, expenses and other:

Cost of product revenues (including definite-lived intangible amortization) 312,068 254,990 206,997

3 unchanged sentences

(Profit) and loss sharing under collaboration agreements ( 1,025 ) 2,045 7,973

Total costs and expenses 3,075,124 2,815,195 2,400,490

Total costs, expenses and other 4,179,851 3,075,124 2,815,195

Income from operations 61,366 620,525 579,440

Interest income and other, net 172,348 39,932 10,647

Interest income 128,710 158,414 40,451

Interest expense ( 2,280 ) ( 2,551 ) ( 2,666 )

Unrealized gain (loss) on long term investments 43,893 ( 87,590 ) ( 24,072 )

Income before provision (benefit) for income taxes 834,215 529,116 570,444

Provision (benefit) for income taxes 236,616 188,456 ( 378,137 )

Realized and unrealized gain (loss) on equity investments 116,025 43,893 ( 87,590 )

Other, net 12,809 13,934 ( 519 )

Income before provision for income taxes 316,630 834,215 529,116

Provision for income taxes 284,015 236,616 188,456

Net income $ 32,615 $ 597,599 $ 340,660

7 unchanged sentences

INCYTE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

2 unchanged sentences

Net income $ 32,615 $ 597,599 $ 340,660

Other comprehensive (loss) income:

Foreign currency translation gain (loss) 25,772 13,065 ( 2,959 )

Other comprehensive income (loss):

Foreign currency translation (loss) gain ( 17,723 ) 25,772 13,065

Unrealized gain (loss) on marketable securities, net of tax 495 4,888 ( 3,918 )

19 unchanged sentences

Stock compensation — 189,691 — — 189,691

Other comprehensive loss — — ( 4,094 ) — ( 4,094 )

Other comprehensive income — — 34,523 — 34,523

Net income — — — 340,660 340,660

6 unchanged sentences

Stock compensation — 216,475 — — 216,475

Other comprehensive income — — 34,523 — 34,523

Other comprehensive loss — — ( 1,963 ) — ( 1,963 )

Net income — — — 597,599 597,599

6 unchanged sentences

Stock compensation — 266,058 — — 266,058

Repurchase of common stock ( 33 ) ( 758,061 ) — ( 1,265,881 ) ( 2,023,975 )

Other comprehensive loss — — ( 26,227 ) — ( 26,227 )

15 unchanged sentences

Other, net ( 9,053 ) 22,579 17,366

Unrealized (gain) loss on long term investments ( 43,893 ) 87,590 24,072

Realized and unrealized (gain) loss on equity investments ( 116,025 ) ( 43,893 ) 87,590

Loss on change in fair value of acquisition-related contingent consideration 19,803 29,202 12,149

8 unchanged sentences

Purchase of long term investments — ( 10,000 ) —

Sale of long term investments 45 — 10,473

Sale of equity investments 284,781 45 —

Capital expenditures ( 86,263 ) ( 32,486 ) ( 77,833 )

2 unchanged sentences

Sale and maturities of marketable securities 231,269 305,784 79,151

Net cash used in investing activities ( 207,677 ) ( 78,542 ) ( 207,699 )

Net cash provided by (used in) investing activities 157,517 ( 207,677 ) ( 78,542 )

Cash flows from financing activities:

Repurchase of common stock ( 2,004,790 ) — —

Proceeds from issuance of common stock under stock plans 49,301 35,836 61,115

2 unchanged sentences

Payment of contingent consideration ( 21,958 ) ( 23,959 ) ( 32,746 )

Net cash (used in) provided by financing activities ( 20,033 ) ( 794 ) 6,176

Net cash used in financing activities ( 2,021,547 ) ( 20,033 ) ( 794 )

Effect of exchange rates on cash, cash equivalents, and restricted cash 2,923 ( 6,676 ) 3,355

Net increase in cash, cash equivalents, and restricted cash 262,101 893,960 544,395

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 1,525,770 ) 262,101 893,960

Cash, cash equivalents, and restricted cash at beginning of period 3,215,221 2,953,120 2,059,160

3 unchanged sentences

Unpaid purchases of property and equipment $ 2,597 $ 5,052 $ 3,493

Unpaid excise tax on repurchase of common stock $ 19,185 $ — $ —

Leased assets obtained in exchange for new operating lease liabilities $ 9,674 $ 5,275 $ 6,745

6 unchanged sentences

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), OPZELURA® (ruxolitinib cream), MINJUVI® (tafasitamab), MONJUVI® (tafasitamab-cxix) and ZYNYZ® (retifanlimab-dlwr).

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), MONJUVI® (tafasitamab-cxix) and ZYNYZ® (retifanlimab-dlwr), as well as NIKTIMVO™ (axatilimab-csfr), which was approved for medical use in the United States in August 2024 and will be co-commercialized.

Our operations are treated as one operating segment.

16 unchanged sentences

Actual results could differ from those estimates.

Reclassifications.

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on the reported results of operations.

Concentrations of Credit Risk.

36 unchanged sentences

Food and Drug Administration (FDA), European Medicines Agency (EMA) or Japanese Ministry of Health, Labour and Welfare (MHLW) as the related costs are expected to be recoverable through the commercialization of the product.

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

Raw materials, active pharmaceutical ingredients ("API") and work-in-process inventory are monitored for obsolescence, as applicable, and generally the shelf life of the finished goods inventory is approximately 36 months from the start of manufacturing of the finished goods, with the exception of OPZELURA and ZYNYZ, which currently has an approximate shelf life of 24 months.

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

Raw materials, active pharmaceutical ingredients ("API") and work-in-process inventory are monitored for obsolescence, as applicable, and generally the shelf life of the finished goods inventory is approximately 36 months from the start of manufacturing of the finished goods, with the exception of OPZELURA, ZYNYZ and NIKTIMVO, which currently has an approximate shelf life of 24 months.

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

6 unchanged sentences

As of December 31, 2024, there were no entities in which we held a variable interest which we determined to be VIEs.

Long Term Investments.

Our long term investments consist of equity investments in common stock of publicly-held companies with whom we have entered into collaboration and license agreements.

We classify all of our equity investments in common stock of publicly-held companies as long term investments on the consolidated balance sheets.

Equity Investments.

Our equity investments consist of investments in common stock of publicly-held companies with whom we have entered into collaboration and license agreements.

We classify our equity investments in common stock of publicly-held companies as either short term investments, for those investments which we intend to sell within one year, or long term investments, for those investments which we intend to hold for longer than one year, on the consolidated balance sheets.

Our equity investments are accounted for at fair value using readily determinable pricing available on a securities exchange on the consolidated balance sheets.

All changes in fair value are reported in the consolidated statements of operations as an unrealized gain (loss) on long term investments.

All changes in fair value are reported in the consolidated statements of operations as a realized and unrealized gain (loss) on equity investments.

In assessing whether we exercise significant influence over any of the companies in which we hold equity investments, we consider the nature and magnitude of our investment, any voting and protective rights we hold, any participation in the governance of the other company, and other relevant factors such as the presence of a collaboration or other business relationship.

Currently, none of our equity investments in publicly-held companies are considered relationships in which we are able to assert control.

Currently, none of our equity investments in publicly-held companies are considered relationships in which we have the ability to exercise significant influence.

Property and Equipment, net.

28 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.

The tax effects of global intangible low-taxed income from certain foreign subsidiaries is recognized in the income tax provision in the period the tax arises.

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.

5 unchanged sentences

Options to purchase stock, restricted stock units and performance stock units are included in diluted earnings per share calculations, unless the effects are anti-dilutive.

Accumulated Other Comprehensive Income.

Accumulated other comprehensive income consists of unrealized gains or losses on our marketable debt securities that are classified as available-for-sale, foreign currency translation gains or losses and unrecognized actuarial gains or loss related to our defined benefit pension plan.

Accumulated Other Comprehensive Income (Loss).

Accumulated other comprehensive income (loss) consists of unrealized gains or losses on our marketable debt securities that are classified as available-for-sale, foreign currency translation gains or losses and unrecognized actuarial gains or loss related to our defined benefit pension plan.

Revenue Recognition.

10 unchanged sentences

Product Revenues

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

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

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

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

We sell JAKAFI, MONJUVI, OPZELURA, PEMAZYRE and ZYNYZ to our customers in the U.S., which include specialty and retail pharmacies, specialty distributors and wholesalers.

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

1 unchanged sentence

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

and mandated discounts in Europe.

Product shipping and handling costs are included in cost of product revenues.

8 unchanged sentences

The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launches.

In the fourth quarter of 2021 and fiscal year 2022 for non-covered patients of OPZELURA, we offered a full buy-down program as we were in the process of obtaining commercial insurance coverage for OPZELURA.

During 2022, we contracted with the three largest group purchasing organizations to obtain coverage for OPZELURA.

All full buy-down programs for OPZELURA ended effective January 31, 2023.

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

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

6 unchanged sentences

Medicare Part D Coverage Gap:

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

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

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

4 unchanged sentences

We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators.

During the fourth quarter of 2021 and fiscal year 2022, we also offered a full buy-down program to non-covered patients of OPZELURA as we were obtaining commercial insurance coverage for OPZELURA.

All full buy-down programs for OPZELURA ended effective January 31, 2023.

Product Royalty Revenues

18 unchanged sentences

If the license of our intellectual property is determined to be distinct from other performance obligations in the arrangement, the functional intellectual property that is transferred to the collaborative partner at the onset of the arrangement is concluded to have significant standalone functionality and value at the point in time at which the intellectual property is made available to the collaborative partner.

For licenses that are not distinct from other obligations identified in the arrangement, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.

For licenses that are not

distinct from other obligations identified in the arrangement, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.

If the combined performance obligation is satisfied over time, we apply an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees.

42 unchanged sentences

Stock Compensation.

Share-based payment transactions with employees, which include stock options, restricted stock units (“RSUs”) and performance shares (“PSUs”), are recognized as compensation expense over the requisite service period based on their estimated fair values as well as expected forfeiture rates.

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

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

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

9 unchanged sentences

The payment of cash and the grant or vesting of equity may be contingent upon the achievement of pre-determined regulatory, sales and internal performance milestones.

Acquisition-Related Contingent Consideration.

Acquisition-related contingent consideration consists of our future royalty obligations on future net revenues of ICLUSIG owed to Takeda Pharmaceutical Company Limited, which acquired ARIAD Pharmaceuticals, Inc.

Acquisition-related contingent consideration was recorded on the acquisition date of June 1, 2016 at the estimated fair value of the obligation, in accordance with the acquisition method of accounting.

The fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement.

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

Acquisitions .

5 unchanged sentences

See Note 5 for additional information.

(Profit) and loss sharing under collaboration agreements.

For the years ended December 31, 2023 and 2022, (profit) and loss sharing under collaboration agreements represents our 50 % share of the United States loss for commercialization of MONJUVI (tafasitamab-cxix) under our agreement with MorphoSys, which is described in Note 7 below.

Acquisition-Related Contingent Consideration.

The fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement.

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

Profit sharing from co-commercialization activities.

In profit sharing arrangements where we are deemed to be the principal, we record 100% of all revenues and expenses associated with the co-commercialization activities.

We record our collaboration partner's share of profit or loss to cost of product revenues within our consolidated statement of operations.

Other components of make-whole payments between us and our collaboration partners are classified in our consolidated statement of operations based on the nature of the underlying payable or receivable.

In profit sharing arrangements where we are deemed to be the agent, we record our share of profit or loss from co-commercialization activities to (profit) and loss sharing under collaboration agreements within our consolidated statement of operations.

Recent Accounting Pronouncements

3 unchanged sentences

This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We are currently analyzing the impact that ASU No.

2023-07 will have on our consolidated financial statements.

See Note 17 for additional disclosures.

In December 2023, the FASB issued ASU No.

3 unchanged sentences

Early adoption is permitted for any annual periods for which financial statements have not been issued or made available for issuance.

We are currently analyzing the impact that ASU No.

2023-09 will have on our consolidated financial statements .

We are currently evaluating the impact that ASU No.

2023-09 will have on our consolidated financial statements and related disclosures.

In March 2024, the SEC issued Release Nos.

34-99678 “ The Enhancement and Standardization of Climate-Related Disclosures for Investors ” to require public companies to provide certain climate-related information in their registration statements and annual reports.

The compliance dates for the rules amended by this release begin in fiscal year 2025 for large accelerated filers.

On April 4, 2024, the SEC issued an order staying the newly adopted rules.

We are currently evaluating the impact of this release on our financial disclosures.

In November 2024, the FASB issued ASU No.

2024-03, “ Disaggregation of Income Statement Expenses (DISE).” This new guidance applies to all public entities and requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

Public entities must adopt the new standard prospectively for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption and retrospective application are permitted.

We are currently evaluating the impact ASU No.

2024-03 will have on our consolidated financial statements and related disclosures.

As discussed in Note 1, revenues are recognized under guidance within ASC 606.

5 unchanged sentences

ICLUSIG revenues, net 114,319 111,623 105,838

MINJUVI/MONJUVI revenues, net 119,236 37,057 19,654

PEMAZYRE revenues, net 81,748 83,642 83,445

MINJUVI revenues, net 37,057 19,654 4,910

ZYNYZ revenues, net 3,185 1,250 —

10 unchanged sentences

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

Losses Estimated

Unrealized (Losses) Estimated

December 31, 2024

2 unchanged sentences

Debt securities (government) $ 442,816 $ 450 $ ( 599 ) $ 442,667

Our available-for-sale debt securities generally have contractual maturity dates of between 12 to 18 months.

The table below summarizes the contractual maturities of our available-for-sale debt securities as of December 31, 2024 (in thousands):

Total Less than 1 Year 1-5 Years

Fair value of debt securities (government) $ 470,263 $ 265,135 $ 205,128

Debt security assets were assessed for risk of expected credit losses per our accounting policy as described in Note 1.

14 unchanged sentences

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.

Our long term equity 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 years ended December 31, 2024 and 2023.

10 unchanged sentences

Debt securities (government) — 470,263 — 470,263

Long term investments (Note 7)

Long term equity investments (Note 7)

18,814 — — 18,814

10 unchanged sentences

Debt securities (government) — 442,667 — 442,667

Long term investments (Note 7)

Long term equity investments (Note 7)

187,716 — — 187,716

41 unchanged sentences

For further information relating to these collaboration and license agreements, refer to Note 7.

In November 2011, we began commercialization and distribution of JAKAFI, in April 2020, we began commercialization and distribution of PEMAZYRE and in October 2021, we began commercialization and distribution of OPZELURA.

In November 2011, we began commercialization and distribution of JAKAFI and in October 2021, we began commercialization and distribution of OPZELURA.

Our product revenues are concentrated in a number of customers these products.

The concentration of credit risk related to our JAKAFI, PEMAZYRE and OPZELURA product revenues is as follows:

The concentration of credit risk related to our JAKAFI and OPZELURA product revenues is as follows:

Percentage of Total Net

6 unchanged sentences

Customer E 13 % 8 % 14 %

Customer F 10 % 10 % 1 %

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

Customers A, B, C, D, and E comprised, in the aggregate, 40 % and 41 % of the accounts receivable balance as of December 31, 2023 and 2022, respectively.

Customers A, B, C, D, E and F comprised, in the aggregate, 52 % and 40 % of the accounts receivable balance as of December 31, 2024 and 2023, respectively.

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

We assessed our collaborative and customer receivable assets as of December 31, 2024 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.

On November 17, 2022, we completed our acquisition of 100 % of the outstanding shares of Villaris Therapeutics, Inc.

("Villaris").

Villaris was an early-stage biopharma company focused on the development of novel antibody therapeutics for vitiligo.

We evaluated the acquired set of activities and assets, and concluded that the acquisition of Villaris did not meet the definition of a business, as substantially all of the purchase price was concentrated in a single identifiable preclinical asset.

Therefore, the transaction was accounted for as an asset acquisition.

Under the terms of the acquisition agreement, we made an upfront payment of $ 70.3 million in 2022, which was attributed to the fair value of the preclinical asset acquired.

As the preclinical asset had no alternative future use at the date of acquisition, the entire upfront payment amount was expensed to research and development expense on the consolidated statement of operations for the year ended December 31, 2022.

There were no material assets or liabilities recorded on the consolidated balance sheet as part of this acquisition.

During December 2023, we made a $ 20.0 million development milestone payment to former Villaris stockholders for the initiation of the Phase 1 clinical trial of INCA034460 as a treatment for vitiligo, which was expensed to research and development expense on the consolidated statement of operations for the year ended December 31, 2023.

Former Villaris stockholders are eligible to receive up to an additional $ 290.0 million upon achievement of certain regulatory milestones, as well as up to an additional $ 1.05 billion in commercial milestones on net sales of commercialized products.

We will accrue for these milestone payments in the future when it becomes probable they will be achieved.

On February 5, 2024, pursuant to a purchase agreement with MorphoSys, we acquired exclusive global rights to tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab).

We previously had the rights to tafasitamab outside of the United States under a January 2020 collaboration and license agreement with MorphoSys, which has now been terminated;

therefore, this new agreement gave us all of the remaining global rights to tafasitamab.

Under the terms of the purchase agreement, we made a payment of $ 25.0 million to MorphoSys and gained global development and commercialization rights for tafasitamab along with MONJUVI inventory.

We will recognize revenue and costs for all U.S.

commercialization and clinical development and MorphoSys will no longer be eligible to receive future milestone, profit split and royalty payments under the now-terminated collaboration and license agreement.

We evaluated the set of activities and assets acquired under the purchase agreement and concluded that it did not meet the definition of a business because the acquired set did not include a substantive process.

Therefore, the transaction was accounted for as an asset acquisition under U.S.

GAAP and the total purchase price, inclusive of direct transaction costs, was allocated to the acquired MONJUVI inventory, in accordance with applicable accounting guidance.

Under the purchase agreement, we have also become the successor to MorphoSys under its collaboration and license agreement with Xencor, Inc.

(“Xencor”), pursuant to which Xencor granted MorphoSys an exclusive, worldwide license, including the right to sublicense under certain conditions, for tafasitamab.

Xencor is entitled to receive up to $ 186.5 million in future contingent development and regulatory milestones and up to $ 50.0 million in sales milestones.

Furthermore, Xencor is eligible to receive tiered royalties on global net sales of tafasitamab in the single-digit to sub-teen double-digit percentage range.

Our royalty obligations continue on a country-by-country basis until the later to occur of the expiration of the last valid claim in the licensed patent covering tafasitamab in such country, or 11 years after the first sale thereof following marketing authorization in such country.

The term of the Xencor collaboration agreement will continue until all of our royalty payment obligations have expired, unless terminated earlier.

The Xencor collaboration agreement may be terminated by either party upon written notice to the other party immediately in the event of the other party’s insolvency or upon 120 days’ written notice for the other party’s uncured material breach (or upon 30 days’ written notice in the case of a breach of a payment obligation).

Moreover, we may terminate the Xencor collaboration agreement without cause upon 90 days’ advance written notice to Xencor.

In the event that (i) we terminate this agreement for convenience or (ii) Xencor terminates due to our material breach, our challenge of Xencor’s licensed patents or our insolvency, worldwide rights to develop, manufacture and commercialize licensed products, including tafasitamab, revert back to Xencor.

Escient Pharmaceuticals, Inc.

On May 30, 2024 we acquired all of the outstanding shares of common stock of Escient, a clinical-stage drug development company advancing novel small molecule therapeutics for systemic immune and neuro-immune disorders, for $ 782.5 million cash consideration, which included Escient's net cash remaining at the close of the transaction, subject to adjustments set forth in the merger agreement with Escient.

Escient’s lead molecule, INCB000262 (formerly EP262), is a first-in-class oral Mas-related G protein-coupled receptor X2 (MRGPRX2) antagonist that has the potential to treat a broad range of inflammatory disorders.

We accounted for the Escient transaction as an asset acquisition under U.S.

GAAP because INCB000262 represents substantially all of the fair value of the gross assets acquired.

In addition to the $ 782.5 million closing cash consideration per the terms of the merger agreement, we incurred $ 2.5 million of direct transaction costs that were included in the total consideration to be allocated to the acquired net assets.

Of the $ 785.0 million total consideration, we recognized on our consolidated statements of operations during the year ended December 31, 2024 related compensation expense of $ 31.5 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition.

The following table summarizes allocation of the remaining U.S.

GAAP consideration, net of compensation expense, across the net assets acquired (in thousands):

Cash and cash equivalents $ 48,302

Marketable securities 3,988

Prepaid expenses and other current assets 1,663

In-process research and development assets 679,388

Deferred tax asset 44,811

Other non-current assets 4,110

Accounts payable and accrued expenses ( 26,611 )

Other current liabilities ( 1,022 )

Non-current liabilities ( 1,118 )

GAAP Consideration (net of compensation expense) $ 753,511

In-process research and development (“IPR&D”) assets are related to acquired clinical-stage product candidates:

lead candidate, INCB000262, and secondary candidate, INCB000547 (formerly EP547).

The fair value of IPR&D assets was based on the present value of future discounted cash flows, which was based on significant estimates.

These estimates included the amount of future product revenues, costs required to conduct clinical trials, future milestones and royalties payable under acquired license agreements, costs to receive regulatory approval and potentially commercialize product candidates, as well as estimates for probability of success and the discount rate.

The concluded allocated fair values for INCB000262 and INCB000547 was $ 644.8 million and $ 34.6 million, respectively.

As both acquired IPR&D assets do not have an alternative future use at the acquisition date, we recognized the full amount of $ 679.4 million as research and development expenses on our consolidated statements of operations during the year ended December 31, 2024.

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

3 unchanged sentences

Total inventory $ 407,199 $ 269,937

Inventories, stated at the lower of cost and net realizable value, consist of raw materials, API and work-in-process, and finished goods, inclusive of freight and inventoriable overhead.

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

At December 31, 2024, $ 58.9 million of inventory was classified as current on the consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months.

4 unchanged sentences

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

At December 31, 2023, inventory with approximately $ 35.6 million of product costs incurred prior to regulatory approval had not yet been sold.

We expect to sell the pre-commercialization inventory over the next 9 to 12 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

At December 31, 2024, inventory with approximately $ 28.3 million of product costs inc urred prior to regulatory approval had not yet been sold.

We expe ct to sell the pre-commercialization inventory over the next 6 months to 41 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

License Agreements

3 unchanged sentences

Novartis also received worldwide exclusive development and commercialization rights to our MET inhibitor compound capmatinib and certain back-up compounds in all indications.

Under this agreement, we initially were eligible to receive up to $ 174.0 million for the achievement of development milestones, up to $ 495.0 million for the achievement of regulatory milestones and up to $ 500.0 million for the achievement of sales milestones.

Under this agreement, we were initially eligible to receive up to $ 174.0 million for the achievement of development milestones, up to $ 495.0 million for the achievement of regulatory milestones and up to $ 500.0 million for the achievement of sales milestones.

In addition, we were initially eligible to receive up to $ 75.0 million of additional potential development and regulatory milestones relating to graft-versus-host-disease (“GVHD”).

2 unchanged sentences

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

In September 2023, we recognized a $ 5.0 million regulatory milestone for the approval of JAKAVI (ruxolitinib) in GVHD by the Japanese Ministry of Health, Labour and Welfare.

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

8 unchanged sentences

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

Milestone and contract revenue under the Novartis agreement was $ 5.0 million, $ 60.0 million and $ 0.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

We had no milestone and contract revenue under the Novartis agreement for the year ended December 31, 2024.

Milestone and contract revenue under the Novartis agreement was $ 5.0 million and $ 60.0 million for the years ended December 31, 2023 and 2022, respectively.

In addition, for the years ended December 31, 2024, 2023 and 2022, we recorded $ 418.8 million, $ 367.6 million and $ 331.6 million, respectively, of product royalty revenues related to Novartis net sales of JAKAVI outside the United States.

8 unchanged sentences

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

In May 2020, we amended our agreement with Lilly to enable Lilly to develop and commercialize baricitinib for the treatment of COVID-19.

As part of the amended agreement, in addition to the royalties described above, we will be entitled to receive additional royalty payments with rates in the low teens on global net sales of baricitinib for the treatment of COVID-19 that exceed a specified aggregate global net sales threshold.

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

1 unchanged sentence

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 was $ 0.0 million , $ 70.0 million and $ 50.0 million, respectively, for the years ended December 31, 2023, 2022 and 2021.

We had no milestone and contract revenue under the Lilly agreement for the years ended December 31, 2024 and 2023.

Milestone and contract revenue under the Lilly agreement was $ 70.0 million for the year ended December 31, 2022.

In addition, for the years ended December 31, 2024, 2023 and 2022, we recorded $ 135.6 million, $ 136.1 million and $ 134.5 million, respectively, of product royalty revenues related to Lilly net sales of OLUMIANT outside the United States.

Lilly – Ruxolitinib

In March 2016, we entered into an amendment to the agreement with Lilly that amended the non-compete provision of the agreement to allow us to engage in the development and commercialization of ruxolitinib in the GVHD field.

Lilly was eligible to receive up to $ 40.0 million in milestone payments relating to ruxolitinib in the GVHD field.

Since the date of the amendment through December 31, 2023, we have fully paid Lilly milestones totaling $ 40.0 million.

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

5 unchanged sentences

Since the inception of the agreement through December 31, 2024, we have paid Agenus milestones totaling $ 30.0 million and Agenus is eligible to receive up to an additional $ 500.0 million in future contingent development, regulatory and commercialization milestones across all programs in the collaboration.

As of December 31, 2023, we held an investment of approximately 12.1 million shares of Agenus Inc.

During 2024, we sold approximately 0.6 million of Agenus Inc.

common stock for proceeds of $ 1.9 million.

As of December 31, 2024, we had no remaining investment in Agenus Inc.

common stock.

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

at December 31, 2023 and 2022 was $ 10.0 million and $ 29.0 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, we recorded an unrealized loss of $ 18.9 million, an unrealized loss of $ 9.9 million and an unrealized gain of $ 4.6 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

The fair market value of our equity investment in Agenus Inc.

at December 31, 2023 was $ 10.0 million.

For the years ended December 31, 2024, 2023 and 2022, we recorded realized and unrealized losses of $ 8.2 million, $ 18.9 million, and $ 9.9 million, respectively, based on the sale of shares and change in fair value of Agenus Inc.’s common stock during the respective periods.

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

11 unchanged sentences

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

During January 2023, August 2023 and December 2023, we paid Merus milestones of $ 2.5 million, $ 2.5 million and $ 1.0 million, respectively, which were recorded as research and development expense in our consolidated statements of operations.

Since the inception of the agreement through December 31, 2024, we have paid and expensed Merus milestones totaling $ 10.0 million.

During August 2023, we purchased approximately 0.5 million shares of Merus’ common shares for an aggregate purchase price of $ 10.0 million in cash.

As of December 31, 2023, we held an investment of approximately 4.0 million Merus common shares.

The fair market value of our total long term investment in Merus as of December 31, 2023 and 2022 was $ 110.1 million and $ 54.9 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, we recorded an unrealized gain of $ 45.2 million, an unrealized loss of $ 58.0 million, and an unrealized gain of $ 48.1 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

During 2024, we sold approximately 4.0 million of Merus’ common shares for proceeds of $ 216.1 million.

As of December 31, 2024, we had no remaining investment in Merus’ common shares.

The fair market value of our equity investment in Merus as of December 31, 2023 was $ 110.1 million.

For the years ended December 31, 2024, 2023 and 2022, we recorded realized and unrealized gains of $ 106.1 million, an unrealized gain of $ 45.2 million, and an unrealized loss of $ 58.0 million, respectively, based on the sale of shares and change in fair value of Merus’ common shares during the respective periods.

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

(“MacroGenics”).

Under this agreement, we received exclusive development and commercialization rights worldwide to MacroGenics’ INCMGA0012 (formerly MGA012), an investigational monoclonal antibody that inhibits PD-1.

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

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

4 unchanged sentences

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

In July 2022, we amended our agreement with MacroGenics to reflect changes related to the payment of certain milestones and paid MacroGenics $ 30.0 million, which was recorded as research and development expense in our consolidated statements of operations in the third quarter of 2022.

In March 2023, we made a $ 15.0 million regulatory milestone payment to MacroGenics for the FDA approval of ZYNYZ for the treatment of adults with Merkel cell carcinoma.

This milestone payment was capitalized as an intangible asset and included in Other intangible assets, net on the consolidated balance sheet as of December 31, 2023, and is being amortized through cost of product revenues over the estimated useful life of 13.5 years.

Since the inception of the agreement through December 31, 2023, we have paid MacroGenics developmental and regulatory milestones totaling $ 115.0 million.

After the amendment and subsequent payments, MacroGenics will be eligible to receive up to an additional $ 320.0 million in future contingent development and regulatory milestones, and up to $ 330.0 million in sales milestones as well as tiered royalties ranging from 15 % to 24 % of global net sales.

In July 2024, the parties amended the agreement, and we agreed to pay MacroGenics $ 100.0 million in exchange for MacroGenics’ agreement that all milestones for squamous cell anal cancer and non-small cell lung cancer have been deemed either achieved or inapplicable and certain future milestones for non-small cell lung cancer were waived.

This $ 100.0 million milestone payment was recorded as research and development expense in our consolidated statements of operations during the year ended December 31, 2024.

Since the inception of the agreement, inclusive of the July 2022 and July 2024 amendments to the agreement, through December 31, 2024, we have paid MacroGenics developmental and regulatory milestones totaling $ 215.0 million.

After these amendments and subsequent payments, MacroGenics will be eligible to receive up to an additional $ 210.0 million in future contingent development and regulatory milestones, and up to $ 330.0 million in sales milestones as well as tiered royalties ranging from 15 % to 24 % of global net sales.

Research and development expenses for the years ended December 31, 2024, 2023 and 2022, also included $ 45.7 million, $ 51.5 million and $ 89.2 million, respectively, of development costs incurred pursuant to the MacroGenics agreement.

At December 31, 2024 and 2023, a total of $ 0.5 million and $ 0.3 million, respectively, of such costs were included in accrued and other liabilities on the consolidated balance sheets.

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

Under this agreement, Syros used its proprietary gene control platform to identify novel therapeutic targets with a focus in myeloproliferative neoplasms and we received options to obtain exclusive worldwide rights to intellectual property resulting from the collaboration for up to seven validated targets.

This agreement was terminated in October 2023.

As of December 31, 2023, we held an investment of approximately 0.1 million shares of Syros common stock.

The fair market value of our long term investment in Syros as of December 31, 2023 and 2022 was $ 0.7 million and $ 0.3 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, we recorded an unrealized gain of $ 0.4 million, an unrealized loss of $ 2.7 million and an unrealized loss of $ 7.1 million, respectively, based on the change in fair value of Syros’ common stock during the respective periods.

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 was under clinical development by MorphoSys at the beginning of the agreement, and has subsequently been commercialized as MONJUVI/MINJUVI.

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

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

MorphoSys is responsible for leading the commercialization strategy and booking all revenue from sales of tafasitamab in the United States, and we and MorphoSys are both responsible for commercialization efforts in the United States and will share equally the profits and losses from the co-commercialization efforts.

We will lead the commercialization strategy outside of the United States, and will be responsible for commercialization efforts and book all revenue from sales of tafasitamab outside of the United States, subject to our royalty payment obligations set forth below.

We and MorphoSys have agreed to co-develop tafasitamab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55 % of such costs and MorphoSys responsible for 45 % of such costs.

Each company is responsible for funding any independent development activities, and we are responsible for funding development activities specific to territories outside of the United States.

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

MorphoSys is eligible to receive up to $ 737.5 million in future contingent development and regulatory milestones and up to $ 315.0 million in commercialization milestones as well as tiered royalties ranging from the mid-teens to mid-twenties of net sales outside of the United States.

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

Since the inception of the agreement through December 31, 2023, we have paid MorphoSys milestones totaling $ 2.5 million, all of which have previously been recorded as research and development expenses.

As of December 31, 2023, we held an investment of approximately 3.6 million American Depository Shares, each representing 0.25 of an ordinary share of MorphoSys AG.

The fair market value of our long term investment in MorphoSys AG as of December 31, 2023 and 2022 was $ 35.9 million and $ 13.0 million, respectively.

For the years ended December 31, 2023, 2022 and 2021 we recorded an unrealized gain of $ 22.9 million, an unrealized loss of $ 21.2 million, and an unrealized loss of $ 68.7 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the years ended December 31, 2023, 2022 and 2021 was $ 2.0 million, $ 8.0 million, and $ 37.0 million respectively, and is recorded as (profit) and loss sharing under collaboration agreements on the consolidated statement of operations.

Research and development expenses for the years ended December 31, 2023, 2022 and 2021, included $ 76.1 million, $ 99.7 million, and $ 77.0 million, respectively, of costs for tafasitamab including our 55 % share of the co-development costs.

At December 31, 2023 and 2022, $ 18.8 million and $ 28.5 million, respectively, was included in accrued and other liabilities on the consolidated balance sheet for amounts due to MorphoSys under the agreement.

During February 2024, we entered into a purchase agreement with MorphoSys, as a result of which we now hold exclusive global rights for tafasitamab.

See Note 18 for further information relating to this agreement.

As described in Note 5, on February 5, 2024, we entered into a purchase agreement with MorphoSys that became effective as of that date, as a result of which we now hold exclusive global rights for tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab).

Prior to the acquisition, pursuant to a now-terminated collaboration and license agreement, we and MorphoSys agreed to co-develop tafasitamab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55 % of such costs and MorphoSys responsible for 45 % of such costs.

Each company was responsible for funding any independent development activities, and we were responsible for funding development activities specific to territories outside of the United States.

During May 2024, as part of the Novartis tender offer for MorphoSys AG’s outstanding shares, we sold all of our 3.6 million American Depository Shares, each representing 0.25 of an ordinary share of MorphoSys AG, for proceeds of $ 66.6 million.

The fair market value of our equity investment in MorphoSys AG as of December 31, 2023 was $ 35.9 million.

For the year ended December 31, 2024, we recorded a realized gain of $ 30.7 million, based on the sale of shares and change in fair value of MorphoSys AG’s ordinary shares during the period.

For the years ended December 31, 2023 and 2022 we recorded an unrealized gain of $ 22.9 million, and an unrealized loss of $ 21.2 million, respectively, based on the change in fair value of MorphoSys AG's ordinary shares during the respective periods.

Our 50 % share of the United States loss or profit for the commercialization of tafasitamab for the period from January 1, 2024 to the asset acquisition on February 5, 2024, was a profit of $ 1.0 million, and is recorded as (profit) and loss sharing under collaboration agreements on the consolidated statement of operations.

As described in Note 5, subsequent to the asset acquisition, we recognize revenue and costs for all commercialization and clinical development of tafasitamab in the United States.

Our 50 % share of the United States loss for the commercialization of tafasitamab for the years ended December 31, 2023 and 2022 was $ 2.0 million and $ 8.0 million, respectively, and is recorded as (profit) and loss sharing under collaboration agreements on the consolidated statement of operations.

Research and development expenses for the period from January 1, 2024 to the asset acquisition on February 5, 2024, includes $ 10.7 million, related to our 55 % share of the co-development costs for tafasitamab.

Research and development expenses for the years ended December 31, 2023 and 2022, included $ 76.1 million and $ 99.7 million, respectively, of costs for tafasitamab including our 55 % share of the co-development costs.

At December 31, 2023, $ 18.8 million was included in accrued and other liabilities on the consolidated balance sheet for amounts due to MorphoSys under the agreement.

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”).

The agreement became effective in December 2021.

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

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

Under the terms of our agreement, we received exclusive commercialization rights to axatilimab outside of the United States and share commercialization rights in the United States with Syndax.

4 unchanged sentences

Each company is responsible for funding any independent development activities.

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

In December 2021, we paid Syndax an upfront, non-refundable payment of $ 117.0 million, which was recorded in research and development expense on the consolidated statement of operations for the year ended December 31, 2021.

In August 2024, we made a $ 12.5 million regulatory milestone payment to Syndax for the FDA approval of NIKTIMVO for the treatment of GVHD.

This milestone payment was capitalized as an intangible asset and included in other intangible assets, net on the consolidated balance sheet as of December 31, 2024, and is being amortized through cost of product revenues over the estimated useful life of 10 years.

Inclusive of an upfront, non-refundable payment, since the inception of the agreement through December 31, 2024, we have made payments of $ 129.5 million to Syndax, which were previously recorded in research and development expense or in other intangible assets, as discussed above.

Syndax is eligible to receive up to $ 207.5 million in future contingent development and regulatory milestones and up to $ 230.0 million in sales milestones as well as tiered royalties ranging in the mid-teens on net sales in Europe and Japan and low double digit percentage on net sales in the rest of the world outside of the United States.

2 unchanged sentences

The fair market value of our long term investment in Syndax as of December 31, 2024 and 2023 was $ 18.8 million and $ 30.7 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, we recorded an unrealized loss of $ 5.5 million, and unrealized gain of $ 5.1 million, and an unrealized gain of $ 6.3 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

Research and development expenses for the year ended December 31, 2023, includes $ 25.8 million related to our 55 % share of the co-development costs for axatilimab.

At December 31, 2023, $ 1.8 million was included in accrued and other liabilities on the consolidated balance sheet for amounts due to Syndax under the agreement.

For the years ended December 31, 2024, 2023 and 2022, we recorded an unrealized loss of $ 11.9 million, an unrealized loss of $ 5.5 million, and an unrealized gain of $ 5.1 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

Research and development expenses for the years ended December 31, 2024 and 2023, includes $ 18.8 million and $ 25.8 million, respectively, related to our 55 % share of the co-development costs for axatilimab.

At December 31, 2024 and 2023, $ 2.2 million and $ 1.8 million, respectively, was included in accrued and other liabilities on the consolidated balance sheet for amounts due to Syndax under the agreement.

China Medical Systems Holdings Limited

In March 2024, we entered into a Collaboration and License Agreement with China Medical System Skinhealth, a wholly-owned dermatology medical aesthetic company and subsidiary of China Medical System Holdings Limited (“CMSHL”), for the development and commercialization of povorcitinib, a selective oral JAK1 inhibitor, in certain indications in certain Asian territories.

In March 2024, we recognized an upfront payment under this agreement of $ 25.0 million upon our transfer of the functional intellectual property related to povorcitinib to CMSHL which was recorded in milestone and contract revenues on the consolidated statement of operations during the year ended December 31, 2024.

We are eligible to receive additional potential development and commercial milestones, as well as royalties on net sales of the licensed product in CMSHL’s territory.

CMSHL received an exclusive license to develop and commercialize and a non-exclusive license to manufacture povorcitinib in autoimmune and inflammatory dermatologic diseases, including non-segmental vitiligo, hidradenitis suppurativa, prurigo nodularis, asthma and chronic spontaneous urticaria, for patients in mainland China, Hong Kong, Macau, Taiwan and certain countries in Southeast Asia.

Other Agreements

15 unchanged sentences

Property and equipment, net $ 763,411 $ 751,513

In May 2024, we purchased additional property in Wilmington, Delaware, including land, office buildings and parking garages for a purchase price of $ 48.7 million.

During the year ended December 31, 2024, we capitalized $ 4.9 million of land, $ 19.5 million of building and parking garage and $ 30.8 million of construction in progress relating to the downtown Wilmington properties.

Depreciation expense, including amortization expense of leasehold improvements, was $ 65.6 million, $ 60.1 million and $ 46.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

42 unchanged sentences

Capitalized milestone payments 11.9 $ 29,500 $ 2,820 $ 26,680 $ 17,000 $ 1,137 $ 15,863

Amortization expense was $ 22.5 million for the year ended December 31, 2023, and amortization expense was $ 21.5 million for the years ended December 31, 2022 and 2021 and is recorded in cost of product revenues on the consolidated statement of operations.

Other 2.0 $ 1,400 $ 423 $ 977 $ — $ — $ —

Amortization expense for the years ended December 31, 2024, 2023 and 2022, was $ 23.6 million, $ 22.5 million, and $ 21.5 million, respectively, and is recorded in cost of product revenues on the consolidated statement of operations.

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets will be as follows for the years ending December 31 (in thousands):

18 unchanged sentences

We are authorized to issue 400,000,000 shares of common stock.

Share Repurchase and Modified "Dutch Auction" Tender Offer .

On May 13, 2024 we announced that our Board of Directors approved a share repurchase authorization of $ 2.0 billion.

Subsequently, we commenced a modified “Dutch Auction” tender offer to repurchase shares of our common stock for an aggregate purchase price of up to $ 1.672 billion (the “tender offer”).

We offered to purchase up to $ 1.672 billion in value of our common stock at a price not greater than $ 60.00 per share nor less than $ 52.00 per share, net to the seller in cash, less any applicable withholding taxes and without interest, upon the terms and subject to the conditions set forth in the tender offer documents that were distributed to stockholders.

A modified “Dutch Auction” tender offer allows stockholders to indicate how much stock they wish to tender and at what price within the range described above.

Based on the number of shares tendered and the prices specified by the tendering stockholders, we determined the lowest price per share that enabled us to purchase $ 1.672 billion of common stock at such price.

On June 13, 2024 we completed the tender offer and repurchased 27,866,666 shares at a price of $ 60.00 per share for an aggregate price of approximately $ 1.672 billion, excluding fees and related expenses, pursuant to the tender offer.

In addition, on May 12, 2024, we entered into a separate stock purchase agreement with Julian C.

Baker (a member of our Board of Directors), Felix J.

Baker, and entities affiliated with Julian C.

Baker, including funds advised by Baker Bros.

Advisors LP (collectively, the “Baker Entities”), to repurchase up to $ 328.0 million of our common stock.

This would enable the Baker Entities to maintain their ownership level as of May 9, 2024 of approximately 16.4 % of Incyte’s outstanding common stock.

The Baker Entities purchase was to be at the same price per share as is determined and paid in the tender offer.

On June 26, 2024, we repurchased 5,459,183 shares at a price of $ 60.00 per share for an aggregate price of approximately $ 328.0 million pursuant to the terms of the stock purchase agreement with the Baker Entities.

We account for share repurchases as retirements, whereby it reduces common stock and additional paid-in capital by the amount of the original issuance, with any excess purchase price recorded as a reduction to retained earnings (accumulated deficit).

Any transaction costs, including the excise tax, directly associated with the share repurchases are included as part of the purchase price.

Under this method, the issued and outstanding shares of common stock are reduced by the number of shares of common stock repurchased, and no treasury stock is recognized on the consolidated financial statements.

A total of 33,325,849 common shares were repurchased during June 2024 at a price of $ 60.00 per share for an aggregate purchase price of approximately $ 2.0 billion.

We incurred $ 24.4 million in fees and expenses associated with the share repurchase, which included $ 19.2 million for excise taxes on share repurchases in accordance with the Inflation Reduction Act of 2022.

We currently expect to pay the excise tax in the first half of 2025.

These costs are recognized within (accumulated deficit) retained earnings on the consolidated balance sheet as of December 31, 2024 as costs to repurchase our common stock.

The purchased shares were cancelled and ceased to be outstanding.

Stock Compensation Plans .

4 unchanged sentences

In June 2023, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Stock Plan from 53,953,475 to 66,453,475 .

2024 Inducement Stock Incentive Plan.

In January 2024, our Board of Directors adopted the Incyte Corporation 2024 Inducement Stock Incentive Plan (the “2024 Inducement Plan”).

In reliance on Nasdaq Marketplace Rule 5635(c)(4), stockholder approval was not obtained.

A total of 1,000,000 shares of common stock are reserved for issuance pursuant to the 2024 Inducement Plan.

Stock Options

Options are granted to employees, consultants, and scientific advisors under the 2010 Stock Plan.

Options are granted to employees, consultants, and scientific advisors under the 2010 Stock Plan and 2024 Inducement Plan.

Options are also granted under the 2010 Stock Plan to non-employee members of our Board of Directors, pursuant to a formula set forth in the 2010 Stock Plan.

All options are exercisable at the fair market value of the stock on the date of grant.

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.

Previously, our option grants generally had seven-year terms and vested over three years , with 33 % vesting after one year and the remainder vesting in 24 equal monthly installments.

Our annual stock option grants 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, subject to customary retirement provisions that may accelerate the requisite service period for expense recognition purposes.

Non-employee director options expire after 10 years and vest in full on the first anniversary of the date of grant or, if earlier, the date of the next annual meeting of stockholders.

Option activity under the 2010 Stock Plan was as follows:

Option activity under the 2010 Stock Plan and 2024 Inducement Plan was as follows:

Shares Subject to

12 unchanged sentences

At December 31, 2024, the aggregate intrinsic value of options outstanding and vested options are $ 15.9 million and $ 15.3 million, respectively.

The following table summarizes information about stock options outstanding as of December 31, 2023 under the 2010 Stock Plan:

The following table summarizes information about stock options outstanding as of December 31, 2024 under the 2010 Stock Plan and 2024 Inducement Plan:

Options Outstanding Options Exercisable

26 unchanged sentences

Each RSU represents the right to acquire one share of our common stock.

Each RSU granted in connection with our annual equity awards will vest 25 % annually over four years , while each RSU granted as outstanding merit awards or as part of retention award programs will vest in a single installment at the end of four years , subject to customary retirement provisions that may accelerate the requisite service period for expense recognition purposes.

We grant PSUs with performance and/or service-based milestones with graded and/or cliff vesting over three to four years .

4 unchanged sentences

For the years ended December 31, 2024, 2023 and 2022, we recorded $ 30.1 million, $ 17.2 million and $ 7.8 million, respectively, of stock compensation expense for PSUs on our consolidated statements of operations.

RSU and PSU award activity under the 2010 Stock Plan was as follows:

RSU and PSU award activity under the 2010 Stock Plan and 2024 Inducement Plan was as follows:

Shares Subject to

11 unchanged sentences

8,656,803 $ 67.81

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

The following table summarizes our shares available for grant under the 2010 Plan and 2024 Inducement Plan.

E ach RSU and PSU grant reduces the available share pool by 2 shares.

1 unchanged sentence

Balance at December 31, 2023

Additional authorization 12,500,000

Options, RSUs and PSUs granted ( 9,196,930 )

Additional authorization - 2024 Inducement Plan 1,000,000

Options, RSUs and PSUs granted and issuance of shares for services rendered ( 9,033,557 )

Options, RSUs and PSUs cancelled 1,232,142

12 unchanged sentences

Stock compensation expense within the consolidated statements of operations also included cost of product revenues for the years ended December 31, 2024, 2023 and 2022 of $ 2.3 million, $ 3.1 million and $ 2.7 million, respectively.

Additionally, as described in Note 5, as part of the Escient acquisition, during the year ended December 31, 2024, we recognized on our consolidated statements of operations related compensation expense of approximately $ 31.5 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition.

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

21 unchanged sentences

federal, state and foreign corporate income taxes.

The provision (benefit) for income taxes is based on income before provision (benefit) for income taxes as follows (in thousands):

The provision for income taxes is based on income before provision for income taxes as follows (in thousands):

Year Ended December 31,

2 unchanged sentences

( 85,130 ) ( 250,039 ) ( 237,665 )

Income before provision (benefit) for income taxes $ 834,215 $ 529,116 $ 570,444

Our provision (benefit) for income taxes consists of the following (in thousands):

Income before provision for income taxes $ 316,630 $ 834,215 $ 529,116

Our provision for income taxes consists of the following (in thousands):

Year Ended December 31,

8 unchanged sentences

( 85,553 ) ( 158,898 ) 57,091

Total provision (benefit) for income taxes $ 236,616 $ 188,456 $ ( 378,137 )

On a periodic basis, we reassess the valuation allowance on our deferred income tax assets.

Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable.

Such assessment is required on a jurisdiction-by-jurisdiction basis.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

In the fourth quarter of 2021, we assessed the valuation allowance and considered positive evidence, including significant cumulative consolidated and U.S.

income over the three years ended December 31, 2021, consistent growth in product revenues, and expectations regarding future profitability.

We also assessed negative evidence, including the potential impact of competition, clinical failures and patent expirations on our projections.

After assessing both the positive evidence and negative evidence, we determined it was more likely than not that the majority of our U.S.

deferred tax assets would be realized in the future and released the associated valuation allowance as of December 31, 2021.

This resulted in a benefit of $ 569.0 million.

Total provision for income taxes $ 284,015 $ 236,616 $ 188,456

A reconciliation of income taxes at the U.S.

federal statutory rate to the provision (benefit) for income taxes is as follows (in thousands):

federal statutory rate to the provision for income taxes is as follows (in thousands):

Year Ended December 31,

6 unchanged sentences

Change in valuation allowance 21,425 1,572,951 67,056

Change in uncertain tax positions 6,418 5,943 3,262

Foreign-derived intangible income ( 31,786 ) ( 32,891 ) ( 36,748 )

2 unchanged sentences

Other 4,742 ( 947 ) ( 564 )

Provision (benefit) for income taxes $ 236,616 $ 188,456 $ ( 378,137 )

Provision for income taxes $ 284,015 $ 236,616 $ 188,456

The 2024 acquisitions accounted for as research and development expenses in the table above reflects the impact of non-deductible charges associated with the Escient acquisition.

The 2023 foreign tax rate differential in the table above reflects the impact of operations in jurisdictions with tax rates that differ from the U.S.

1 unchanged sentence

It also includes a tax benefit associated with the remeasurement of foreign deferred tax assets resulting from the cancellation of a tax holiday.

The income tax credits in the table above includes a tax benefit associated with the issuance of non-refundable Swiss income tax credits.

The 2023 income tax credits in the table above includes a tax benefit associated with the issuance of non-

refundable Swiss income tax credits.

The 2023 remeasurement of foreign deferred tax assets and the Swiss income tax credits are fully offset with a valuation allowance in the table above.

18 unchanged sentences

Net deferred tax assets $ 762,071 $ 631,886

The valuation allowance for deferred tax assets increased by approximately $ 1.6 billion during the year ended December 31, 2023 and increased by approximately $ 63.9 million during the year ended December 31, 2022.

The valuation allowance increase during 2023 was primarily due to the issuance of non-refundable Swiss income tax credits, future deductible temporary differences mainly associated with U.S.

research and development expenses required to be capitalized and amortized under the Tax Cuts and Jobs Act of 2017, as well as foreign net operating losses (“NOLs”), which are not more-likely-than-not to be realized as of December 31, 2023.

During the year ended December 31, 2023, our gross deferred tax assets increased by $ 1.8 billion primarily due to our Swiss subsidiaries being granted approximately $ 1.4 billion of non-refundable income tax credits, the mandatory capitalization of research and development expenses and the remeasurement of foreign deferred tax assets.

The Swiss credits are available for use during the periods 2023 through 2028, however due to the subsidiaries' historical cumulative loss position, we have recorded a full valuation allowance at this time as it is more-likely-than-not that the credits would expire unused.

The valuation allowance position will continue to be monitored in the future.

During the year ended December 31, 2024, the Company’s net deferred tax assets increased by $ 130.2 million.

This was primary due to future deductible temporary differences associated with U.S.

research and development expenses required to be capitalized and amortized under the Tax Cuts and Jobs Act of 2017, partially offset by an increase to a related valuation allowance.

As part of the Escient acquisition, the Company also recorded a net deferred tax asset of $ 44.8 million predominately related to U.S.

net operating losses ("NOLs") and capitalized researched and development costs.

As of December 31, 2024, the Company continues to maintain a valuation allowance on certain U.S.

temporary differences, foreign NOLs and the non-refundable Swiss income tax credits granted in the year ended December 31, 2023.

The valuation allowance for deferred tax assets increased by approximately $ 43.4 million during the year ended December 31, 2024 and increased by approximately $ 1.6 billion during the year ended December 31, 2023.

The valuation allowance increase during 2024 was primarily due to future deductible temporary differences mainly associated with U.S.

research and development expenses required to be capitalized and amortized under the Tax Cuts and Jobs Act of 2017 and the acquisition of Escient’s U.S.

NOLs, a portion of which is not more-likely-than-not to be realized as of December 31, 2024.

This was partially offset by the expiration of foreign NOLs with a full valuation allowance.

As of December 31, 2024, we had NOL carryforwards, research and development credit carryforwards and foreign income tax credit carryforwards as follows (in thousands):

1 unchanged sentence

Net operating loss carryforwards

Federal $ 102,034 Indefinite

State 782,156 2025 through 2044;

1 unchanged sentence

Research and development credit carryforwards

Federal $ 9,431 2039 through 2044

State 18,064 2025 through 2043

Swiss income tax credit carryforwards 1,382,413 2028

The Federal NOL and tax credit carryforward are subject to an annual limitation under Internal Revenue Code Section 382.

The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable taxing authority.

7 unchanged sentences

Additions related to current period tax positions 5,939 3,019

Additions related to acquisitions 9,114 —

Settlements ( 71 ) ( 209 )

4 unchanged sentences

During the years ending December 31, 2024 and 2023, we recorded interest and penalties as a component of income tax expense of $ 8.5 million and $ 4.9 million, respectively.

We believe that it is reasonably possible that a decrease of up to $ 22.0 million in unrecognized tax benefits may be necessary within the next twelve months due to a lapse in the statute of limitations.

federal, state and local income tax returns and income tax returns in various foreign jurisdictions, with statutes of limitation generally ranging from three to five years during which such tax returns may be audited by the relevant tax authorities.

Those statutes could be extended due to NOL or tax credit carryforwards generated during these periods that are subsequently utilized in open tax periods.

In general, tax authorities have the ability to adjust the NOL carryforward or tax credits for three years after utilization of that year’s tax attribute carryforward.

As of December 31, 2024 and 2023, the Company has accrued liabilities of $ 18.7 million and $ 10.1 million, respectively, for interest and penalties related to its uncertain tax positions.

We do not expect any significant decreases in recognized tax benefits within the next 12 months.

One or more of our legal entities file income tax returns in the U.S.

and in certain foreign jurisdictions.

Our income tax returns may be examined by tax authorities in those jurisdictions.

Significant disputes may arise with tax authorities involving issues such as the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws and regulations and relevant facts.

In the U.S., the statute of limitations remains open beginning with tax year 2021.

We are currently under U.S.

federal audit for tax year 2021.

Net Income Per Share

37 unchanged sentences

Plan participants' contributions 5,067 4,534

Actuarial loss (gain) 26,682 ( 33,783 )

Actuarial loss 17,443 26,682

Transfer of benefits net of payments from fund 1,382 1,866

Expenses paid from assets ( 101 ) ( 118 )

Translation loss (gain) 13,007 ( 1,441 )

Translation (gain) loss ( 12,102 ) 13,007

Benefit obligation, end of year 195,487 169,667

5 unchanged sentences

Expenses paid from assets ( 101 ) ( 118 )

Translation gain (loss) 10,082 ( 1,189 )

Translation (loss) gain ( 9,034 ) 10,082

Fair value of plan assets, end of year 149,636 128,482

12 unchanged sentences

The components of net periodic benefit cost other than the service cost component are included in interest income and other, net on the consolidated statements of operations.

Other changes in the plans assets and the benefit obligation that is recognized in accumulated other comprehensive income (loss) were as follows, net of tax (in thousands):

Other changes in the plans assets and the benefit obligation that is recognized in accumulated other comprehensive (loss) income were as follows, net of tax (in thousands):

Year Ended December 31,

2024 2023 2022

Pension (asset) liability, beginning of year $ ( 1,699 ) $ 23,677 $ 23,831

Plan amendment — — 6,017

Pension liability (asset), beginning of year $ 30,924 $ ( 1,699 ) $ 23,677

Net prior service costs ( 1,474 ) ( 771 ) ( 773 )

6 unchanged sentences

Commitments and Contingencies

In August 2021, we entered into a revolving credit and guaranty agreement, which was subsequently amended in May 2023 (as amended, the “Credit Agreement”), among the Incyte Corporation, as borrower, subsidiary Incyte Holdings Corporation, as a guarantor, a group of lenders (the “Lenders”), and J.P.

In August 2021, we entered into a revolving credit and guaranty agreement, which was subsequently amended in May 2023 and June 2024 (as amended, the “Credit Agreement”), among the Incyte Corporation, as borrower, subsidiary Incyte Holdings Corporation, as a guarantor, a group of lenders (the “Lenders”), and J.P.

Morgan Chase Bank, N.A.

as administrative agent.

Under the Credit Agreement, the Lenders have committed to provide an unsecured revolving credit facility in an aggregate principal amount of up to $ 500.0 million that matures in August 2024.

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

The June 2024 amendment to the Credit Agreement extended the maturity date of the revolving credit facility from August 2024 to June 2027.

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, our pro forma consolidated leverage ratio would not exceed 0.25 :1.00 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 the consolidated leverage ratio or (b) a Eurodollar rate plus an applicable rate per annum varying from 1.125 % to 1.875 % depending on the consolidated leverage ratio.

Loans under the Credit Agreement will bear interest, at our option, at a per annum rate equal to either (a) a base rate (but not less than 1.00 %) plus an applicable rate per annum varying from 0.125 % to 0.875 % depending on the consolidated leverage ratio or (b) a rate based on the secured overnight financing rate (“SOFR”) plus a credit spread adjustment of 0.10 % (but not less than 0.00 %), plus an applicable rate per annum varying from 1.125 % to 1.875 % depending on the 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.

During May 2023, we amended the Credit Agreement to replace the benchmark rate at which U.S.-dollar-denominated borrowings bear interest from LIBOR to the forward-looking Secured Overnight Financing Rate ("SOFR") term rate administered by CME Group Benchmark Administration Limited.

As a result of this amendment, we can borrow at Term SOFR plus a credit spread adjustment of 0.10 % subject to a floor of zero .

We may, at our option, prepay any borrowings under the Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty, subject to customary exceptions.

As of December 31, 2024, we were 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.

13 unchanged sentences

Segment Information

We currently operate in one operating business segment focused on the global discovery, development and commercialization of proprietary therapeutics.

Our determination that we operate as a single segment is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods.

We do not operate in any material separate lines of business or separate business entities with respect to our products or product development.

During the year ended December 31, 2023, total revenues generated by subsidiaries in the United States was approximately $ 3.5 billion and total revenues generated from subsidiaries in Europe and Japan was approximately $ 179.3 million.

During the year ended December 31, 2022, total revenues generated by subsidiaries in the United States was approximately $ 3.2 billion and total revenues generated from subsidiaries in Europe was approximately $ 147.0 million.

We operate in one operating segment, and therefore one reportable segment, focused on the global discovery, development and commercialization of proprietary therapeutics.

We manage business activities on a consolidated basis through the development and commercialization of oncology and dermatology products, which are sold to U.S.

and international customers.

Our determination that we operate as a single operating segment is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods.

Our chief operating decision maker is the Chief Executive Officer.

The accounting policies for our single operating segment are the same as those described in the summary of significant accounting policies.

Our single operating segment generates revenues from the development and commercialization of oncology and dermatology pharmaceutical products, which are developed by our research and development department, as well as from product royalties, milestone and contract revenues from the out-licensing of our intellectual property to third parties.

For our segment, the chief operating decision maker uses net income or loss, that also is reported on the consolidated statements of operations as consolidated net income (loss), to allocate resources (including employees, property, and financial resources), predominantly during the annual budget and forecasting process.

The chief operating decision maker also uses consolidated net income or loss, along with non-financial inputs and qualitative information, to evaluate our performance, establish compensation, monitor budget versus actual results, and decide the level of investment in our various operating activities and other capital allocation activities.

The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

Net income for our segment was as follows (in thousands):

Year Ended December 31,

2024 2023 2022

Product revenues, net $ 3,618,888 $ 3,165,168 $ 2,746,897

Product royalty revenues 579,329 523,481 482,738

Milestone and contract revenues 43,000 7,000 165,000

Total revenues 4,241,217 3,695,649 3,394,635

Costs, expenses and other:

Cost of product revenues (including definite-lived intangible amortization) 312,068 254,990 206,997

Research and development - internal 1

957,043 815,025 739,785

Research and development - external 2

866,005 775,919 720,201

Other research and development 3

783,800 36,650 125,950

Sales and marketing 945,428 876,703 770,141

General and administrative 296,729 284,590 231,999

Loss on change in fair value of acquisition-related contingent consideration 19,803 29,202 12,149

(Profit) and loss sharing under collaboration agreements ( 1,025 ) 2,045 7,973

Other segment items 4

28,751 22,926 238,780

Net income $ 32,615 $ 597,599 $ 340,660

Research and development - internal is comprised of internally generated costs such as salaries, travel, regulatory costs, lab costs, contracting, etc.

Research and development - external is comprised of specific program spend with external vendors (i.e.

contract manufacturing organization, contract research organization and lab vendors for clinical, technical operations and toxicology services).

Other research and development is comprised of all other costs including certain one-time costs resulting from the acquisition of IPR&D assets and one-time development milestone expenses.

Other segment items is comprised of interest income, interest expense, realized and unrealized (gain) loss on equity investments, other, net, and provision for income taxes.

During the year ended December 31, 2024, total revenues generated by subsidiaries in the United States was approximately $ 4.0 billion, total revenues generated from subsidiaries in Europe was approximately $ 260.4 million, and total revenues generated from subsidiaries in other countries was approximately $ 6.2 million.

During the year ended December 31, 2023, total revenues generated by subsidiaries in the United States was approximately $ 3.5 billion, total revenues generated from subsidiaries in Europe was approximately $ 175.9 million, and total revenues generated from subsidiaries in other countries was approximately $ 4.9 million.

As of December 31, 2023, property and equipment, net was approximately $ 432.3 million in the United States, approximately $ 314.4 million in Europe and approximately $ 4.8 million in Japan.

As of December 31, 2022, property and equipment, net was approximately $ 442.0 million in the United States and approximately $ 295.8 million in Europe and approximately $ 1.5 million in Japan.

Subsequent Event

On February 5, 2024, we entered into a purchase agreement with MorphoSys that became effective as of that date, as a result of which we now hold exclusive global rights for tafasitamab, a humanized Fc-modified CD19-targeting immunotherapy marketed in the United States as MONJUVI (tafasitamab-cxix) and outside of the United States as MINJUVI (tafasitamab).

Under the terms of the new agreement, we made a payment of $ 25.0 million to MorphoSys and gained global development and commercialization rights for tafasitamab along with MONJUVI inventory.

We will recognize revenue and costs for all U.S.

commercialization and clinical development and MorphoSys will no longer be eligible to receive future milestone, profit split and royalty payments under our prior agreement with MorphoSys , which agreement has now been terminated.

Under the purchase agreement, we have become the successor to MorphoSys under its collaboration and license agreement with Xencor, Inc.

(“Xencor”), pursuant to which Xencor granted MorphoSys an exclusive, worldwide license, including the right to sublicense under certain conditions, for tafasitamab.

Xencor is entitled to receive up to $ 186.5 million in future contingent development and regulatory milestones, and up to $ 50.0 million in sales milestones.

Furthermore, Xencor is eligible to receive tiered royalties on global net sales of tafasitamab in the single-digit to sub-teen double-digit percentage range.

The term of the Xencor collaboration agreement will continue until all of our royalty payment obligations have expired, unless terminated earlier.

Moreover, we may terminate the Xencor collaboration agreement without cause upon 90 days’ advance written notice to Xencor.

As of December 31, 2024, property and equipment, net was approximately $ 474.1 million in the United States, approximately $ 277.6 million in Switzerland and approximately $ 11.7 million in other countries.

As of December 31, 2023, property and equipment, net was approximately $ 432.3 million in the United States, approximately $ 303.9 million in Switzerland and approximately $ 15.3 million in other countries.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data