UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to               

Commission File Number: 001-12400

INCYTE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-3136539
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1801 Augustine Cut-Off Wilmington, DE 19803	19803
(Address of principal executive offices)	(Zip Code)

(302) 498-6700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $.001 par value per share	INCY	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

The number of outstanding shares of the registrant’s Common Stock, $.001 par value, was 192,598,027 as of July 23, 2024.

INCYTE CORPORATION

INDEX

PART I: FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Forward-Looking Statements	27
	Summary Risk Factors	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	56
PART II: OTHER INFORMATION
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 5.	Other Information	84
Item 6.	Exhibits	85
	Signatures	86

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

INCYTE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	June 30, 2024		December 31, 2023*
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	987,293	$	3,213,376
Marketable securities—available-for-sale (amortized cost $464,272 and $442,816 as of June 30, 2024 and December 31, 2023, respectively; allowance for credit losses $0 as of June 30, 2024 and December 31, 2023)	462,207		442,667
Short term equity investments	69,875		—
Accounts receivable	739,050		743,557
Inventory	100,704		62,972
Prepaid expenses and other current assets	207,956		182,830
Total current assets	2,567,085		4,645,402
Restricted cash	1,631		1,845
Long term equity investments	29,668		187,716
Inventory	255,268		206,965
Property and equipment, net	762,009		751,513
Finance lease right-of-use assets, net	25,535		25,535
Other intangible assets, net	113,536		123,545
Goodwill	155,593		155,593
Deferred income tax asset	729,561		631,886
Other assets, net	21,917		52,107
Total assets	$	4,661,803	$	6,782,107
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	148,174	$	109,601
Accrued compensation	113,536		153,348
Accrued and other current liabilities	1,034,316		935,569
Finance lease liabilities	3,874		3,439
Acquisition-related contingent consideration	37,155		38,422
Total current liabilities	1,337,055		1,240,379
Acquisition-related contingent consideration	156,845		173,578
Finance lease liabilities	28,745		29,162
Other liabilities	142,099		149,151
Total liabilities	1,664,744		1,592,270
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding	—		—
Common stock, $0.001 par value; 400,000,000 shares authorized; 191,572,449 and 224,286,862 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	191		224
Additional paid-in capital	4,382,734		5,016,122
Accumulated other comprehensive (loss) income	(5,420)		13,106
(Accumulated deficit) retained earnings	(1,380,446)		160,385
Total stockholders’ equity	2,997,059		5,189,837
Total liabilities and stockholders’ equity	$	4,661,803	$	6,782,107

*The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date.

See accompanying notes.

3

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Product revenues, net	$	906,566	$	827,005	$	1,636,489	$	1,520,242
Product royalty revenues	137,193		127,605		263,159		243,041
Milestone and contract revenues	—		—		25,000		—
Total revenues	1,043,759		954,610		1,924,648		1,763,283
Costs, expenses and other:
Cost of product revenues (including definite-lived intangible amortization)	76,634		68,326		137,590		125,148
Research and development	1,138,380		400,750		1,567,640		807,391
Selling, general and administrative	305,982		283,929		606,238		599,535
Loss on change in fair value of acquisition-related contingent consideration	893		8,374		437		14,570
(Profit) and loss sharing under collaboration agreements	—		(549)		(1,025)		(1,911)
Total costs, expenses and other	1,521,889		760,830		2,310,880		1,544,733
(Loss) income from operations	(478,130)		193,780		(386,232)		218,550
Interest income and other, net	49,769		42,668		94,513		75,541
Interest expense	(657)		(655)		(1,087)		(1,124)
Realized and unrealized gain on equity investments	39,241		41,811		139,188		36,493
(Loss) income before provision for income taxes	(389,777)		277,604		(153,618)		329,460
Provision for income taxes	54,824		74,056		121,435		104,209
Net (loss) income	$	(444,601)	$	203,548	$	(275,053)	$	225,251
Net (loss) income per share:
Basic	$	(2.04)	$	0.91	$	(1.24)	$	1.01
Diluted	$	(2.04)	$	0.90	$	(1.24)	$	1.00
Shares used in computing net (loss) income per share:
Basic	218,175		223,248		221,329		223,104
Diluted	218,175		225,649		221,329		225,541

See accompanying notes.

4

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net (loss) income	$	(444,601)	$	203,548	$	(275,053)	$	225,251
Other comprehensive income (loss):
Foreign currency translation gain (loss)	407		5,189		(17,413)		8,449
Unrealized (loss) gain on marketable securities, net of tax	(254)		489		(2,000)		2,909
Defined benefit pension gain, net of tax	599		186		887		379
Other comprehensive income (loss)	752		5,864		(18,526)		11,737
Comprehensive (loss) income	$	(443,849)	$	209,412	$	(293,579)	$	236,988

See accompanying notes.

5

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands, except number of shares)

	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity
Balances at January 1, 2024	$	224	$	5,016,122	$	13,106	$	160,385	$	5,189,837
Issuance of 245,228 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes	—		(5,697)		—		—		(5,697)
Issuance of 1,359 shares of Common Stock for services rendered	—		80		—		—		80
Stock compensation	—		59,781		—		—		59,781
Other comprehensive loss	—		—		(19,278)		—		(19,278)
Net income	—		—		—		169,548		169,548
Balance at March 31, 2024	$	224	$	5,070,286	$	(6,172)	$	329,933	$	5,394,271
Issuance of 316,997 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes and 291,735 shares of Common Stock under the ESPP	—		13,792		—		—		13,792
Issuance of 1,345 shares of Common Stock for services rendered	—		80		—		—		80
Stock compensation	—		56,637		—		—		56,637
Repurchases of common stock	(33)		(758,061)		—		(1,265,778)		(2,023,872)
Other comprehensive income	—		—		752		—		752
Net loss	—		—		—		(444,601)		(444,601)
Balances at June 30, 2024	$	191	$	4,382,734	$	(5,420)	$	(1,380,446)	$	2,997,059

6

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(unaudited, in thousands, except number of shares)

	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
Balances at January 1, 2023	$	223	$	4,792,041	$	15,069	$	(437,214)	$	4,370,119
Issuance of 313,995 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes	—		11,235		—		—		11,235
Issuance of 1,073 shares of Common Stock for services rendered	—		80		—		—		80
Stock compensation	—		53,558		—		—		53,558
Other comprehensive income	—		—		5,873		—		5,873
Net income	—		—		—		21,703		21,703
Balances at March 31, 2023	$	223	$	4,856,914	$	20,942	$	(415,511)	$	4,462,568
Issuance of 59,093 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares, net of shares withheld for taxes and 216,168 shares of Common Stock under the ESPP	—		13,704		—		—		13,704
Issuance of 1,282 shares of Common Stock for services rendered	—		80		—		—		80
Stock compensation	—		54,928		—		—		54,928
Other comprehensive income	—		—		5,864		—		5,864
Net income	—		—		—		203,548		203,548
Balances at June 30, 2023	$	223	$	4,925,626	$	26,806	$	(211,963)	$	4,740,692

See accompanying notes.

7

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net (loss) income	$	(275,053)	$	225,251
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	43,995		39,508
Stock-based compensation	116,418		107,899
Deferred income taxes	(51,733)		(61,864)
Other, net	2,588		(3,670)
Realized and unrealized gain on equity investments	(139,188)		(36,493)
Loss on change in fair value of acquisition-related contingent consideration	437		14,570
Changes in operating assets and liabilities:
Accounts receivable	4,507		6,885
Prepaid expenses and other assets	(39,748)		(8,219)
Inventory	(84,976)		(53,436)
Accounts payable	38,573		(122,008)
Accrued and other liabilities	27,428		92,500
Net cash (used in) provided by operating activities	(356,752)		200,923
Cash flows from investing activities:
Sale of equity investments	227,257		45
Capital expenditures	(63,692)		(19,243)
Payments for intangible assets	(1,400)		(15,000)
Purchases of marketable securities	(204,091)		(152,277)
Sale and maturities of marketable securities	182,634		150,487
Net cash provided by (used in) investing activities	140,708		(35,988)
Cash flows from financing activities:
Repurchases of common stock	(2,004,687)		—
Proceeds from issuance of common stock under stock plans	14,960		28,367
Tax withholdings related to restricted and performance share vesting	(6,865)		(3,428)
Payment of finance lease liabilities	(1,782)		(1,638)
Payment of contingent consideration	(11,216)		(6,424)
Net cash (used in) provided by financing activities	(2,009,590)		16,877
Effect of exchange rates on cash, cash equivalents, and restricted cash	(663)		(2,090)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(2,226,297)		179,722
Cash, cash equivalents, and restricted cash at beginning of period	3,215,221		2,953,120
Cash, cash equivalents, and restricted cash at end of period	$	988,924	$	3,132,842
Supplemental Schedule of Cash Flow Information
Income taxes paid	$	229,674	$	137,313
Unpaid purchases of property and equipment	$	800	$	4,420
Unpaid excise tax on repurchase of common stock	$	19,185	$	—
Leased assets obtained in exchange for new operating lease liabilities	$	2,188	$	5,275
Leased assets obtained in exchange for new finance lease liabilities	$	1,468	$	1,024

See accompanying notes.

8

INCYTE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Note 1. Organization and Business

Incyte Corporation (including its subsidiaries, “Incyte,” “we,” “us,” or “our”) is a biopharmaceutical company focused on developing and commercializing proprietary therapeutics. Our portfolio includes compounds in various stages, ranging from preclinical to late stage development, and commercialized products JAKAFI® (ruxolitinib), ICLUSIG® (ponatinib), PEMAZYRE® (pemigatinib), OPZELURA® (ruxolitinib cream), MINJUVI® (tafasitamab), MONJUVI® (tafasitamab-cxix), and ZYNYZ® (retifanlimab-dlwr). Our operations are treated as one operating segment.

Note 2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and six months ended June 30, 2024 and 2023, and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2023 has been derived from our audited consolidated financial statements.

Although we believe that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Principles of Consolidation. The condensed consolidated financial statements include the accounts of Incyte Corporation and our wholly owned subsidiaries. All inter-company accounts, transactions, and profits have been eliminated in consolidation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Pronouncements and Regulatory Updates

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This amended guidance applies to all public entities and aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, to enable investors to develop more decision-useful financial analyses. 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 evaluating the impact that ASU No. 2023-07 will have on our annual consolidated financial statements.

9

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This amended guidance applies to all entities and broadly aims to enhance the transparency and decision usefulness of income tax disclosures. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for any annual periods for which financial statements have not been issued or made available for issuance. We are currently evaluating the impact that ASU No. 2023-09 will have on our consolidated financial statements.

In March 2024, the SEC issued Release Nos. 33-11275; 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.

Note 3. Revenues

Revenues are recognized under guidance within ASC 606, Revenue from Contracts with Customers. The following table presents our disaggregated revenue for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
JAKAFI revenues, net	$	705,973	$	682,384	$	1,277,812	$	1,262,353
OPZELURA revenues, net	121,695		80,233		207,419		136,785
ICLUSIG revenues, net	26,862		29,087		57,205		56,772
PEMAZYRE revenues, net	20,269		21,572		37,945		44,047
MINJUVI/MONJUVI revenues, net	31,116		13,159		54,990		19,715
ZYNYZ revenues, net	651		570		1,118		570
Total product revenues, net	906,566		827,005		1,636,489		1,520,242
JAKAVI product royalty revenues	99,317		90,448		188,912		167,140
OLUMIANT product royalty revenues	31,702		32,009		62,291		66,164
TABRECTA product royalty revenues	5,298		4,799		10,532		8,976
PEMAZYRE product royalty revenues	876		349		1,424		761
Total product royalty revenues	137,193		127,605		263,159		243,041
Milestone and contract revenues	—		—		25,000		—
Total revenues	$	1,043,759	$	954,610	$	1,924,648	$	1,763,283

For further information on the MINJUVI/MONJUVI revenues, refer to Note 6, and for further information on our revenue-generating contracts, refer to Note 8.

Note 4. Fair Value of Financial Instruments

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

	Amortized Cost		Net Unrealized Losses		Estimated Fair Value
June 30, 2024
Debt securities (government)	$	464,272	$	(2,065)	$	462,207
December 31, 2023
Debt securities (government)	$	442,816	$	(149)	$	442,667

10

Our available-for-sale debt securities generally have contractual maturity dates of between 12 to 18 months. Debt security assets were assessed for risk of expected credit losses. As of June 30, 2024 and December 31, 2023, the available-for-sale debt securities were held in U.S.-government backed securities and in Treasury bonds and were assessed on an individual security basis to have a de minimis risk of credit loss.

Fair Value Measurements

FASB accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (“the exit price”) in an orderly transaction between market participants at the measurement date. The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value we use quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3—Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement.

Recurring Fair Value Measurements

Our marketable securities consist of investments in U.S. government debt securities that are classified as available-for-sale. Additionally, we have short term equity investments, which we intended to sell within one year, classified as Level 1 that were valued using their respective closing stock prices on The Nasdaq Stock Market.

At June 30, 2024 and December 31, 2023, our Level 2 U.S. government debt securities were valued using readily available pricing sources which utilize market observable inputs, including the current interest rate and other characteristics for similar types of investments. Our long term 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 six months ended June 30, 2024.

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

	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2024
Cash and cash equivalents	$	987,293	$	—	$	—	$	987,293
Debt securities (government)	—		462,207		—		462,207
Short term equity investments (Note 8)	69,875		—		—		69,875
Long term equity investments (Note 8)	29,668		—		—		29,668
Total assets	$	1,086,836	$	462,207	$	—	$	1,549,043

11

	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2023
Cash and cash equivalents	$	3,213,376	$	—	$	—	$	3,213,376
Debt securities (government)	—		442,667		—		442,667
Long term equity investments (Note 8)	187,716		—		—		187,716
Total assets	$	3,401,092	$	442,667	$	—	$	3,843,759

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

	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2024
Acquisition-related contingent consideration	$	—	$	—	$	194,000	$	194,000
Total liabilities	$	—	$	—	$	194,000	$	194,000

	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2023
Acquisition-related contingent consideration	$	—	$	—	$	212,000	$	212,000
Total liabilities	$	—	$	—	$	212,000	$	212,000

The following is a roll forward of our Level 3 liabilities (in thousands):

	2024
Balance at January 1,	$	212,000
Contingent consideration earned during the period but not yet paid	(8,893)
Payments made during the period	(9,544)
Change in fair value of contingent consideration	437
Balance at June 30,	$	194,000

The initial fair value of the contingent consideration was determined on the date of acquisition, June 1, 2016, using an income approach based on projected future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment over 18 years, and discounted to present value at a rate of 10%. The fair value of the contingent consideration is remeasured each reporting period, with changes in fair value recorded in the condensed consolidated statements of operations. The valuation inputs utilized to estimate the fair value of the contingent consideration as of June 30, 2024 and December 31, 2023 included a discount rate of 10% and updated projections of future net revenues of ICLUSIG in the European Union and other countries for the approved third line treatment. The change in fair value of the contingent consideration during the three and six months ended June 30, 2024 was due primarily to fluctuations in foreign currency exchange rates impacting future revenue projections of ICLUSIG and the passage of time.

12

We generally make payments to Takeda Pharmaceutical Company Limited quarterly based on the royalties or any additional milestone payments earned in the previous quarter. At June 30, 2024 and December 31, 2023, contingent consideration earned but not yet paid was $8.9 million and $10.3 million, respectively, and was included in accrued and other current liabilities on the condensed consolidated balance sheets.

Note 5. Concentration of Credit Risk and Current Expected Credit Losses

In November 2009, we entered into a collaboration and license agreement with Novartis Pharmaceutical International Ltd. (“Novartis”). In December 2009, we entered into a license, development and commercialization agreement with Eli Lilly and Company (“Lilly”). The above collaboration partners comprised, in aggregate, 18% and 20% of the accounts receivable balance as of June 30, 2024 and December 31, 2023, respectively. For further information relating to these collaboration and license agreements, refer to Note 8.

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

	Percentage of Total Net Product Revenues for the Three Months Ended				Percentage of Total Net Product Revenues for the Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Customer A	15	%	17	%	16	%	17	%
Customer B	10	%	9	%	11	%	10	%
Customer C	18	%	20	%	18	%	19	%
Customer D	8	%	10	%	8	%	10	%
Customer E	13	%	10	%	12	%	11	%
Customer F	10	%	10	%	10	%	9	%

We are exposed to risks associated with extending credit to customers related to the sale of products. Customers A, B, C, D, E and F comprised, in aggregate, 52% and 48% of the accounts receivable balance as of June 30, 2024 and December 31, 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 June 30, 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. As of June 30, 2024 and December 31, 2023, we had no allowance for doubtful accounts.

Note 6. Acquisitions

Tafasitamab

On February 5, 2024, we entered into a purchase agreement with MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG (together with MorphoSys AG, “MorphoSys”), under which we gained 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.

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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. ("Escient")

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.

Escient’s lead molecule, 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 EP262 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 related compensation expense of $31.5 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition on our condensed consolidated statements of operations for the quarter ended June 30, 2024.

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)
Total U.S. GAAP Consideration (net of compensation expense)	$	753,511

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In-process research and development (“IPR&D”) assets are related to acquired clinical-stage product candidates: lead candidate, EP262, and secondary candidate, 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 number of potential patients and market prices of future product candidates, 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 EP262 and EP547 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 condensed consolidated statement of operations for the three and six months ended June 30, 2024.

Note 7. Inventory

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

	June 30, 2024		December 31, 2023
Raw materials	$	24,579	$	23,282
Work-in-process	284,706		209,793
Finished goods	46,687		36,862
Total inventory	$	355,972	$	269,937

Inventories, stated at the lower of cost and net realizable value, consist of raw materials, work in process and finished goods. At June 30, 2024, $100.7 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months. At June 30, 2024, $255.3 million of inventory was classified as non-current on the condensed consolidated balance sheet as we did not expect this inventory to be consumed for commercial use within the next twelve months. We obtain some inventory components from a limited number of suppliers due to technology, availability, price, quality or other considerations. The loss of a supplier, the deterioration of our relationship with a supplier, or any unilateral violation of the contractual terms under which we are supplied components by a supplier could adversely affect our total revenues and gross margins.

We capitalize inventory after regulatory approval as the related costs are expected to be recoverable through the commercialization of the product. Costs incurred prior to regulatory approval are recorded as research and development expense in our statements of operations. At June 30, 2024, inventory with approximately $34.9 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 5 to 27 months and, as a result, cost of product revenues will reflect a lower average per unit cost of materials.

Note 8. License Agreements

Novartis

In November 2009, we entered into a Collaboration and License Agreement with Novartis. Under the terms of the agreement, Novartis received exclusive development and commercialization rights outside of the United States to our JAK inhibitor ruxolitinib and certain back-up compounds for hematologic and oncology indications, including all hematological malignancies, solid tumors and myeloproliferative diseases. We retained exclusive development and commercialization rights to JAKAFI (ruxolitinib) in the United States and in certain other indications. 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 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”). Since the inception of the agreement through June 30, 2024, we have recognized and received, in the aggregate, $157.0 million for the achievement of development milestones, $345.0 million for the achievement of regulatory milestones, and $200.0 million for the achievement of sales milestones.

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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%. We are obligated to pay to Novartis tiered royalties in the low single-digits on future JAKAFI net sales within the United States contingent on certain conditions. During the three and six months ended June 30, 2024, such royalties on net sales within the United States totaled $34.6 million and $57.6 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations. During the three and six months ended June 30, 2023, such royalties on net sales within the United States totaled $33.5 million and $56.9 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations. At June 30, 2024 and December 31, 2023, $433.2 million and $375.6 million, respectively, of accrued royalties were included in accrued and other current liabilities on the condensed consolidated balance sheets, payment of which is dependent on the outcome of a contract dispute with Novartis. Each company is responsible for costs relating to the development and commercialization of ruxolitinib in its respective territories, with costs of collaborative studies shared equally. Novartis is also responsible for all costs relating to the development and commercialization of capmatinib.

Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2024 was $99.3 million and $188.9 million, respectively. Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2023 was $90.4 million and $167.1 million, respectively. Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2024 was $5.3 million and $10.5 million, respectively. Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and six months ended June 30, 2023 was $4.8 million and $9.0 million, respectively.

Lilly – Baricitinib

In December 2009, we entered into a License, Development and Commercialization Agreement with Lilly. Under the terms of the agreement, Lilly received exclusive worldwide development and commercialization rights to our JAK inhibitor baricitinib, and certain back-up compounds for inflammatory and autoimmune diseases.

Under this agreement, we were initially eligible to receive up to $150.0 million for the achievement of development milestones, up to $365.0 million for the achievement of regulatory milestones and up to $150.0 million for the achievement of sales milestones. Since the inception of the agreement through June 30, 2024, we have recognized and received, in aggregate, $149.0 million for the achievement of development milestones, $335.0 million for the achievement of regulatory milestones and $50.0 million for the achievement of sales milestones. We are also eligible to receive tiered, double-digit royalties on future global sales with rates ranging up to the mid-twenties if a product is successfully commercialized.

Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and six months ended June 30, 2024 was $31.7 million and $62.3 million, respectively. Product royalty revenue related to Lilly net sales of OLUMIANT outside of the United States for the three and six months ended June 30, 2023 was $32.0 million and $66.2 million, respectively.

Agenus

In January 2015, we entered into a License, Development and Commercialization Agreement with Agenus Inc. and its wholly-owned subsidiary, 4-Antibody AG (now known as Agenus Switzerland Inc.), which we collectively refer to as Agenus. Under this agreement, which was amended in February 2017, the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using Agenus’ antibody discovery platforms.

Since the inception of the agreement through June 30, 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.

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As of June 30, 2024, we held an investment of approximately 0.6 million shares of Agenus Inc. common stock, which reflects a one-for-twenty reverse stock split effected by Agenus Inc. in April 2024. The fair market value of our equity investment in Agenus Inc. at June 30, 2024 and December 31, 2023 was $10.1 million and $10.0 million, respectively. For the three and six months ended June 30, 2024, we recorded an unrealized gain of $3.1 million and $0.1 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods. For the three and six months ended June 30, 2023, we recorded an unrealized gain of $0.9 million and an unrealized loss of $9.7 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during the respective periods.

Merus

In December 2016, we entered into a Collaboration and License Agreement with Merus N.V. (“Merus”). Under this agreement, the parties have agreed to collaborate with respect to the research, discovery and development of bispecific antibodies utilizing Merus’ technology platform. The collaboration encompasses up to ten independent programs.

Since the inception of the agreement through June 30, 2024, we have paid and expensed Merus milestones totaling $10.0 million.

During the second quarter of 2024, we sold approximately 3.0 million of Merus' common shares for proceeds of $160.6 million. As of June 30, 2024, we held an investment of approximately 1.0 million common shares. The fair market value of our equity investment in Merus at June 30, 2024 and December 31, 2023 was $59.6 million and $110.1 million, respectively. For the three and six months ended June 30, 2024, we recorded realized and unrealized gains of $40.0 million and $110.2 million, respectively, based on the sale of shares and change in fair value of remaining Merus’ common shares during the respective periods. For the three and six months ended June 30, 2023, we recorded an unrealized gain of $28.2 million and $38.6 million, respectively, based on the change in fair value of Merus’ common shares during the respective periods.

MacroGenics

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. 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. MacroGenics has retained the right to develop and commercialize, at its cost and expense, its pipeline assets in combination with INCMGA0012. In addition, MacroGenics has the right to manufacture a portion of both companies’ global clinical and commercial supply needs of INCMGA0012.

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 condensed consolidated balance sheet as of June 30, 2024, and is being amortized through cost of product revenues over the estimated useful life of 13.5 years.

Since the inception of the agreement, inclusive of the July 2022 amendment to the agreement, through June 30, 2024, we have paid MacroGenics developmental and regulatory milestones totaling $115.0 million. On July 24, 2024, the parties further amended the agreement, with Incyte agreeing to pay MacroGenics $100.0 million now in exchange for MacroGenics’ agreement to waive future milestones for squamous cell anal cancer and non-small cell lung cancer. 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 three and six months ended June 30, 2024 also included $13.2 million and $25.3 million, respectively, of development costs incurred pursuant to the MacroGenics agreement. Research and development expenses for the three and six months ended June 30, 2023 also included $12.1 million and $29.9 million, respectively, of development costs incurred pursuant to the MacroGenics agreement. At June 30, 2024 and December 31, 2023, a total of $0.6 million and $0.3 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

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MorphoSys

As described in Note 6, 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' 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 June 30, 2024 and December 31, 2023 was $0.0 million and $35.9 million, respectively. For the three and six months ended June 30, 2024, we recorded realized and unrealized gains of $0.8 million and $30.7 million, respectively, based on the sale of shares and change in fair value of MorphoSys AG's ordinary shares during the respective periods. For the three and six months ended June 30, 2023, we recorded an unrealized gain of $12.7 million and $14.1 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 condensed consolidated statement of operations. As described in Note 6, subsequent to the asset acquisition, we will recognize revenue and costs for all commercialization and clinical development of tafasitamab in the United States. Our 50% share of the United States profit or loss for the commercialization of tafasitamab for the three and six months ended June 30, 2023 was a profit of $0.5 million and $1.9 million, respectively, and is recorded as (Profit) and loss sharing under collaboration agreements on the condensed 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 three and six months ended June 30, 2023, includes $20.3 million and $45.5 million, respectively, related to our 55% share of the co-development costs for tafasitamab. At June 30, 2024 and December 31, 2023, $0.0 million and $18.8 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the former agreement.

Syndax

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”). We and Syndax have agreed to co-develop axatilimab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55% of such costs and Syndax responsible for 45% of such costs. Each company is responsible for funding any independent development activities.

Inclusive of an upfront, non-refundable payment, since the inception of the agreement through June 30, 2024, we have made payments of $117.0 million to Syndax, which were previously recorded in research and development expense. Syndax is eligible to receive up to $220.0 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.

As of June 30, 2024, we held an investment of approximately 1.4 million shares of Syndax common stock. The fair market value of our long term investment in Syndax as of June 30, 2024 and December 31, 2023 was $29.2 million and $30.7 million. For the three and six months ended June 30, 2024, we recorded an unrealized loss of $4.6 million and $1.5 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods. For the three and six months ended June 30, 2023, we recorded an unrealized loss of $0.2 million and $6.4 million, respectively, based on the change in fair value of Syndax’s common stock during the respective periods.

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Research and development expenses for the three and six months ended June 30, 2024, includes $4.7 million and $11.8 million, respectively, related to our 55% share of the co-development costs for axatilimab. Research and development expenses for the three and six months ended June 30, 2023, includes $6.2 million and $11.8 million, respectively, related to our 55% share of the co-development costs for axatilimab. At June 30, 2024 and December 31, 2023, $2.6 million and $1.8 million, respectively, was included in accrued and other liabilities on the condensed 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 condensed consolidated statement of operations during the first quarter of 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

In addition to the license and collaboration agreements discussed above, we have various other license and collaboration agreements that are not individually material to our operating results or financial condition at this time. Pursuant to the terms of those agreements, we may be required to pay, or we may receive, additional amounts contingent upon the occurrence of various future events such as future discovery, development, regulatory or commercial milestones, which in the aggregate could be material. In addition, if any products related to these collaborations are approved for sale, we may be required to pay, or we may receive, royalties on future sales. The payment or receipt of these amounts, however, is contingent upon the occurrence of various future events, the likelihood of which cannot presently be determined.

Note 9. Property and Equipment, net

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

	June 30, 2024		December 31, 2023
Office equipment	$	23,506	$	23,417
Laboratory equipment	221,918		220,677
Computer equipment	151,602		147,570
Land	15,432		10,931
Building and leasehold improvements	573,160		584,755
Operating lease right-of-use assets	18,120		20,553
Construction in progress	55,795		13,544
	1,059,533		1,021,447
Less accumulated depreciation and amortization	(297,524)		(269,934)
Property and equipment, net	$	762,009	$	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. As of June 30, 2024 we capitalized $4.9 million of land and recorded approximately $43.8 million of construction in progress relating to the office buildings and parking garages.

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Note 10. Accrued and Other Current Liabilities

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

	June 30, 2024		December 31, 2023
Royalties	$	444,305	$	387,362
Clinical related costs	105,675		109,618
Sales allowances	349,904		279,914
Sales and marketing	39,541		37,369
Accrued Taxes	32,396		42,295
Operating lease liabilities	4,929		5,686
Other current liabilities	57,566		73,325
Total accrued and other current liabilities	$	1,034,316	$	935,569

Note 11. Stockholders' Equity

2010 Stock Incentive Plan. In May 2010 the Board of Directors adopted the 2010 Stock Incentive Plan (the “2010 Stock Plan”), which was most recently amended in April 2023, for issuance of common stock to employees, non-employee directors, consultants, and scientific advisors. Awards under the 2010 Stock Plan include stock options, restricted stock units (“RSUs”) and performance shares (“PSUs”).

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.

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, or a lower amount depending on the number of shares that are properly tendered and not properly withdrawn. 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 which expired at 12:00 midnight, at the end of the day, New York City time on June 10, 2024.

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. and Felix J. 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 condensed consolidated financial statements.

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A total of 33,325,849 common shares were repurchased during June 2024 at a price of $60.00 for an aggregate purchase price of approximately $2.0 billion. We incurred $24.3 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 second quarter of 2025. These costs were recognized within (Accumulated deficit) retained earnings on the condensed consolidated balance sheet during the three months ended June 30, 2024 as costs to repurchase the Company’s common stock. The purchased shares were cancelled and ceased to be outstanding.

Note 12. Stock Compensation

We recorded $56.6 million and $116.4 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2024, respectively. We recorded $54.5 million and $107.9 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2023, respectively. Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $34.5 million, $71.3 million, $32.8 million and $63.8 million for the three and six months ended June 30, 2024 and 2023, respectively. Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $21.7 million, $44.1 million, $20.9 million and $42.5 million for the three and six months ended June 30, 2024 and 2023, respectively. Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $0.4 million, $1.0 million, $0.8 million and $1.6 million, respectively, for the three and six months ended June 30, 2024 and 2023.

Additionally, as described in Note 6, as part of the Escient acquisition, during the three and six months ended June 30, 2024, we recognized related compensation expense of $31.5 million associated with the accelerated vesting for certain Escient stock awards in connection with the acquisition on our condensed consolidated statements of operations.

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

	Employee Stock Options												Employee Stock Purchase Plan
	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Six Months Ended
	June 30,												June 30,
	2024			2023			2024			2023			2024			2023			2024			2023
Average risk-free interest rates	4.36		%	3.88		%	4.13		%	3.76		%	5.33		%	4.87		%	5.41		%	4.27		%
Average expected life (in years)	5.84			5.58			4.91			4.95			0.50			0.50			0.50			0.50
Volatility	25		%	29		%	30		%	32		%	28		%	27		%	22		%	23		%
Weighted-average fair value (in dollars)	$	20.18		$	22.57		$	20.59		$	26.78		$	10.45		$	13.82		$	10.54		$	14.08

The risk-free interest rate is derived from the U.S. Federal Reserve rate in effect at the time of grant. The expected life calculation is based on the observed and expected time to the exercise of options by our employees based on historical exercise patterns for similar type options. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options. A dividend yield of zero is assumed based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends. Nonemployee awards are measured on the grant date by estimating the fair value of the equity instruments to be issued using the expected term, similar to our employee awards.

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

	Shares Subject to Outstanding Options
	Shares	Weighted Average Exercise Price
Balance at December 31, 2023	12,457,158	$	85.40
Options granted	721,080	$	60.99
Options exercised	(37,500)	$	52.12
Options cancelled	(198,243)	$	84.53
Balance at June 30, 2024	12,942,495	$	84.15

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.

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

	Shares Subject to Outstanding Awards
	Shares	Grant Date Value
Balance at December 31, 2023	7,165,342	$	72.17
RSUs granted	408,722	$	60.33
Additional PSUs earned	21,866	$	83.58
RSUs released	(393,218)	$	79.69
RSUs cancelled	(122,580)	$	71.83
Balance at June 30, 2024	7,080,132	$	71.11

RSUs and PSUs are granted to our employees at the share price on the date of grant. 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.

We grant PSUs with performance and/or service-based milestones with graded and/or cliff vesting over three to four years. The shares of our common stock into which each PSU may convert is subject to a multiplier based on the level at which the financial, developmental and market performance conditions are achieved over the service period. Compensation expense for PSUs with financial and developmental performance conditions is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement. For PSUs containing performance conditions which were not deemed probable of achievement, no stock compensation expense is recorded. Compensation expense for PSUs with market performance conditions is calculated using a Monte Carlo simulation model as of the date of grant and recorded over the requisite service period. For the three and six months ended June 30, 2024 we recorded $3.5 million and $6.9 million, respectively, of stock compensation expense for PSUs on our condensed consolidated statements of operations. For the three and six months ended June 30, 2023 we recorded $2.7 million and $9.2 million of stock compensation expense for PSUs on our condensed consolidated statements of operations.

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The following table summarizes our shares available for grant under the 2010 Stock Plan and 2024 Inducement Plan. Each RSU and PSU grant reduces the available share pool by 2 shares.

	Shares Available for Grant
Balance at December 31, 2023	10,815,026
Additional authorization - 2024 Inducement Plan	1,000,000
Options, RSUs and PSUs granted	(1,560,390)
Options, RSUs and PSUs cancelled	443,403
Balance at June 30, 2024	10,698,039

Based on our historical experience of employee turnover, we have assumed an annualized forfeiture rate of 5% for our options, RSUs and PSUs. Under the true-up provisions of the stock compensation guidance, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

Total compensation cost of options granted but not yet vested, as of June 30, 2024, was $24.1 million, which is expected to be recognized over the weighted average period of approximately 1.0 years. Total compensation cost of RSUs granted but not yet vested, as of June 30, 2024, was $165.1 million, which is expected to be recognized over the weighted average period of approximately 1.4 years. Total compensation cost of PSUs granted but not yet vested, as of June 30, 2024, was $10.1 million, which is expected to be recognized over the weighted average period of 1.0 years, should the underlying performance conditions be deemed probable of achievement.

Note 13. Income Taxes

For the three and six months ended June 30, 2024 and 2023, we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for income taxes (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Loss) income before provision for income taxes	$	(389,777)	$	277,604	$	(153,618)	$	329,460
Provision for income taxes	54,824		74,056		121,435		104,209
Effective tax rate	(14.1)%		26.7%		(79.0)%		31.6%

Our effective tax rate for the three and six months ended June 30, 2024 was higher than the U.S. statutory rate primarily due to non-deductible charges of $710.9 million associated with the Escient acquisition. Our effective tax rate for the three and six months ended June 30, 2023 was higher than the U.S. statutory rate primarily due to foreign losses with no associated tax benefit (i.e., full valuation allowance) and an increase in our valuation allowance against certain U.S. federal and state deferred tax assets. This was partially offset by tax rate benefits associated with research and development and orphan drug tax credit generations and the foreign derived intangible income deduction. The effective tax rate for the three and six months ended June 30, 2024 was unfavorable as compared to the prior year period primarily due to the non-deductible charges associated with the Escient acquisition.

As described in Note 6, as part of the Escient acquisition, we recorded $44.8 million of deferred tax assets predominately related to net operating losses and capitalized researched and development costs.

The balance of our unrecognized tax benefits (including penalties and interest) increased by $19.3 million during the six months ended June 30, 2024. This movement was primarily driven by increases related to prior period tax positions of $7.5 million, increases related to acquired reserves of $8.8 million, and $3.0 million of interest and penalties. We accrue interest and penalties related to unrecognized tax benefits as a component of its provision for income taxes.

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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 2020. We are currently under U.S. federal audit for tax year 2021.

The Organization for Economic Cooperation and Development Pillar 2 guidelines, which were supported by over 130 countries worldwide, are designed to impose a 15% global minimum tax on adjusted financial results. Certain aspects of Pillar 2 took effect on January 1, 2024, while other aspects go into effect on January 1, 2025. We are evaluating the potential impact of Pillar 2 on our business, as many of the countries in which we operate are enacting legislation implementing Pillar 2. Although many aspects of Pillar 2 remain to be clarified, at this time there are no material impacts on our effective tax rate.

Note 14. Net (Loss) Income Per Share

Net (loss) income per share was calculated as follows for the periods indicated below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Basic net (loss) income	$	(444,601)	$	203,548	$	(275,053)	$	225,251
Weighted average common shares outstanding	218,175		223,248		221,329		223,104
Basic net (loss) income per share	$	(2.04)	$	0.91	$	(1.24)	$	1.01
Diluted net (loss) income	$	(444,601)	$	203,548	$	(275,053)	$	225,251
Weighted average common shares outstanding	218,175		223,248		221,329		223,104
Dilutive stock options and awards	—		2,401		—		2,437
Weighted average shares used to compute diluted net (loss) income per share	218,175		225,649		221,329		225,541
Diluted net (loss) income per share	$	(2.04)	$	0.90	$	(1.24)	$	1.00

All stock options and stock awards were excluded from the diluted share calculation for the three and six months ended June 30, 2024 because their effect would have been anti-dilutive, as we were in a net loss position. The potential common shares that were excluded from the diluted net (loss) income per share computation are as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Outstanding stock options and awards	16,067,125	12,806,418	16,148,294	10,781,677

Note 15. Employee Benefit Plans

Defined Contribution Plans

We have a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code covering all U.S. employees and defined contribution plans for other Incyte employees in Europe and Japan. Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations. Defined contribution expense for the three and six months ended June 30, 2024 was $5.2 million and $10.6 million, respectively. Defined contribution expense for the three and six months ended June 30, 2023 was $4.0 million and $9.6 million, respectively.

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Defined Benefit Pension Plans

We have defined benefit pension plans for our employees in Europe which provide benefits to employees upon retirement, death or disability. The assets of the pension plans are held in collective investment accounts represented by the cash surrender value of an insurance policy and are classified as Level 2 within the fair value hierarchy.

The net periodic benefit cost was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Service cost	$	2,657	$	1,733	$	5,278	$	3,821
Interest cost	786		44		1,227		661
Expected return on plan assets	(1,961)		(736)		(3,444)		(2,276)
Amortization of prior service cost	206		276		407		379
Amortization of actuarial losses	393		(90)		480		—
Net periodic benefit cost	$	2,081	$	1,227	$	3,948	$	2,585

The components of net periodic benefit cost other than the service cost component are included in Interest income and other, net on the condensed consolidated statements of operations. We expect to contribute a total of $10.0 million to the pension plans in 2024 inclusive of the amounts contributed to the plan during the current period.

Note 16. Commitments and Contingencies

Commitments

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 Incyte Corporation, as borrower, our 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. 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 our 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 (but not less than 1.00%) plus an applicable rate per annum varying from 0.125% to 0.875% depending on our 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 our consolidated leverage ratio. Commitment fees payable on the undrawn commitment range from 0.15% per annum to 0.225% per annum, based on our consolidated leverage ratio. 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 June 30, 2024 and December 31, 2023, we had no outstanding borrowings and were in compliance with all covenants under this facility.

Contingencies

In the ordinary course of our business, we may become involved in lawsuits, proceedings, and other disputes, including commercial, intellectual property, regulatory, employment, and other matters. We record a reserve for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

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We have entered into the collaboration agreements described in Note 8, as well as various other collaboration agreements that are not individually, or in the aggregate, significant to our operating results or financial condition at this time. We may in the future seek to license additional rights relating to technologies or drug development candidates in connection with our drug discovery and development programs. Under these agreements, we may be required to pay upfront fees, milestone payments, and royalties on sales of future products.

We brought a lawsuit against the U.S. Centers for Medicare and Medicaid Services (“CMS”) alleging that a recent regulation issued by CMS on the definition of “line extension” for purposes of the Medicaid rebate program is too broad and has the unintended consequence of treating OPZELURA as a “line extension” of JAKAFI under this program. We believe that such a reading would violate CMS’s statutory authority and be arbitrary and capricious given that OPZELURA, among other differentiators, is indicated to treat entirely different medical conditions and entirely different patient populations than JAKAFI. As of June 30, 2024, we have accrued approximately $91.1 million within accrued and other current liabilities on the condensed consolidated balance sheet, relating to the incremental rebates that would be owed were OPZELURA considered a line extension of JAKAFI. The impact on OPZELURA gross to net deductions for the quarter ending June 30, 2024 is approximately 6.8%. If OPZELURA is not treated as a line extension of JAKAFI, this would result in a reversal of our accrual and a lower future gross to net deduction for OPZELURA.

In addition, as described in Note 8, we have an outstanding contractual dispute with Novartis relating to royalties on JAKAFI net sales within the United States.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations as of and for the three and six months ended June 30, 2024 should be read in conjunction with the unaudited condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements as of and for the year ended December 31, 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2023 previously filed with the SEC.

Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future periods, future events or our future operating or financial plans or performance. Often, these statements include the words “believe,” “expect,” “target,” “anticipate,” “intend,” “plan,” “seek,” “estimate,” “potential,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” or “may,” or the negative of these terms, and other similar expressions. These forward-looking statements include statements as to:

•the discovery, development, formulation, manufacturing and commercialization of our compounds, our drug candidates and JAKAFI®/JAKAVI® (ruxolitinib), PEMAZYRE® (pemigatinib), ICLUSIG® (ponatinib), MONJUVI®(tafasitamab-cxix) / MINJUVI® (tafasitamab), OPZELURA® (ruxolitinib) cream and ZYNYZ® (retifanlimab-dlwr);

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

•conducting clinical trials internally, with collaborators, or with clinical research organizations;

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

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

•the regulatory approval process, including obtaining U.S. Food and Drug Administration and other international regulatory authorities’ approval for our products in the United States and abroad;

•the safety, effectiveness and potential benefits and indications of our drug candidates and other compounds under development;

•the timing and size of our clinical trials; the compounds expected to enter clinical trials; timing of clinical trial results;

•our ability to manage expansion of our drug discovery and development operations;

•future required expertise relating to clinical trials, manufacturing, sales and marketing;

•obtaining and terminating licenses to products, drug candidates or technology, or other intellectual property rights;

•the receipt from or payments pursuant to collaboration or license agreements resulting from milestones or royalties;

•plans to develop and commercialize products on our own;

•plans to use third-party manufacturers;

•plans for our manufacturing operations;

•expected expenses and expenditure levels; expected uses of cash; expected revenues and sources of revenues, including milestone payments; expectations with respect to inventory;

•expectations with respect to reimbursement for our products;

•the expected impact of recent accounting pronouncements and changes in tax laws;

•expected losses; fluctuation of losses; currency translation impact associated with non-U.S. operations and collaboration royalties;

•our profitability; the adequacy of our capital resources to continue operations;

•the need to raise additional capital;

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

•our expectations regarding competition;

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

•our patent prosecution and maintenance efforts.

These forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected and include, but are not limited to:

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

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

•our ability to establish and maintain effective sales, marketing and distribution capabilities;

•the risk of reliance on other parties to manufacture our products, which could result in a short supply of our products, increased costs, and withdrawal of regulatory approval;

•our ability to maintain regulatory approvals to market our products;

•our ability to achieve a significant market share in order to achieve or maintain profitability;

•the risk of civil or criminal penalties if we market our products in a manner that violates health care fraud and abuse and other applicable laws, rules and regulations;

•our ability to discover, develop, formulate, manufacture and commercialize our drug candidates;

•the risk of unanticipated delays in, or discontinuations of, research and development efforts;

•the risk that previous preclinical testing or clinical trial results are not necessarily indicative of future clinical trial results;

•risks relating to the conduct of our clinical trials, including geopolitical risks;

•changing regulatory requirements;

•the risk of adverse safety findings;

•the risk that results of our clinical trials do not support submission of a marketing approval application for our drug candidates;

•the risk of significant delays or costs in obtaining regulatory approvals;

•risks relating to our reliance on third-party manufacturers, collaborators, and clinical research organizations;

•risks relating to the development of new products and their use by us and our current and potential collaborators;

•risks relating to our inability to control the development of out-licensed compounds or drug candidates;

•risks relating to our collaborators’ ability to develop and commercialize JAKAVI, OLUMIANT, TABRECTA and the drug candidates licensed from us;

•costs associated with prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights;

•our ability to maintain or obtain adequate product liability and other insurance coverage;

•the risk that our drug candidates may not obtain or maintain regulatory approval;

•the impact of technological advances and competition, including potential generic competition;

•our ability to compete against third parties with greater resources than ours;

•risks relating to changes in pricing and reimbursement in the markets in which we may compete;

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•risks relating to governmental healthcare reform efforts, including efforts to control, set or cap pricing for our commercial drugs in the U.S and abroad;

•competition to develop and commercialize similar drug products;

•our ability to obtain and maintain patent protection and freedom to operate for our discoveries and to continue to be effective in expanding our patent coverage;

•the impact of changing laws on our patent portfolio;

•developments in and expenses relating to litigation;

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

•unanticipated delays or changes in plans or regulatory agency interactions or other issues relating to our large molecule production facility;

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

•our ability to obtain additional capital when needed;

•fluctuations in net cash provided and used by operating, financing and investing activities;

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

•risks relating to our ability to sustain profitability;

•risks related to public health pandemics such as the COVID-19 pandemic, natural disasters, or geopolitical events such as the Russian invasion of Ukraine; and

•the risks set forth under “Risk Factors.”

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

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

Incyte, JAKAFI, MINJUVI, MONJUVI, OPZELURA, PEMAZYRE and ZYNYZ are our registered trademarks. We also refer to trademarks of other corporations and organizations in this Quarterly Report on Form 10-Q.

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Summary Risk Factors

Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A. of this report, “Risk Factors,” before deciding whether to invest in our company.

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

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

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

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

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

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

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

◦Competition for our products could harm our business and result in a decrease in our revenue.

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

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

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

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

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

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

◦Business disruptions, including those resulting from public health pandemics, natural disasters, and other geopolitical events, could adversely affect our business and results of operations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Overview

Incyte is a global biopharmaceutical company engaged in the discovery, development and commercialization of proprietary therapeutics. Our global headquarters is located in Wilmington, Delaware, where we conduct discovery, clinical development and commercial operations. We also conduct clinical development and commercial operations from our European headquarters in Morges, Switzerland and our other offices across Europe, as well as our Japanese office in Tokyo and our Canadian headquarters in Montreal.

We are focused in two therapeutic areas that are defined by the indications of our approved medicines and the diseases for which our clinical candidates are being developed. One therapeutic area is Hematology/Oncology, which comprises Myeloproliferative Neoplasms (MPNs), Graft-Versus-Host Disease (GVHD), solid tumors and hematologic malignancies. The other therapeutic area is Inflammation and Autoimmunity (IAI), which includes our Dermatology commercial franchise. We are also eligible to receive milestones and royalties on molecules discovered by us and licensed to third parties.

Hematology and Oncology

Our hematology and oncology franchise comprises five approved products, which are JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix)/MINJUVI (tafasitamab), PEMAZYRE (pemigatinib), ICLUSIG (ponatinib) and ZYNYZ (retifanlimab-dlwr), as well as numerous clinical development programs.

JAKAFI (ruxolitinib)

JAKAFI (ruxolitinib) is our first product to be approved for sale in the United States. It was approved by the U.S. Food and Drug Administration (FDA) in November 2011 for the treatment of adults with intermediate or high-risk myelofibrosis (MF); in December 2014 for the treatment of adults with polycythemia vera (PV) who have had an inadequate response to or are intolerant of hydroxyurea; in May 2019 for the treatment of steroid-refractory acute graft-versus-host disease (GVHD) in adult and pediatric patients 12 years and older; and in September 2021 for the treatment of chronic GVHD after failure of one or two lines of systemic therapy in adult and pediatric patients 12 years and older. MF and PV are both myeloproliferative neoplasms (MPNs), a type of rare blood cancer, and GVHD is an adverse immune response to an allogeneic hematopoietic stem cell transplant (HSCT). Under our collaboration agreement with our collaboration partner Novartis Pharmaceutical International Ltd., Novartis received exclusive development and commercialization rights to ruxolitinib outside of the United States for all hematologic and oncologic indications and sells ruxolitinib outside of the United States under the name JAKAVI.

In 2003, we initiated a research and development program to explore the inhibition of enzymes called janus associated kinases (JAK). The JAK family is composed of four tyrosine kinases—JAK1, JAK2, JAK3 and Tyk2—that are involved in the signaling of a number of cytokines and growth factors. JAKs are central to a number of biologic processes, including the formation and development of blood cells and the regulation of immune functions. Dysregulation of the JAK-STAT signaling pathway has been associated with a number of diseases, including myeloproliferative neoplasms, other hematological malignancies, rheumatoid arthritis and other chronic inflammatory diseases.

We have discovered multiple potent, selective and orally bioavailable JAK inhibitors that are selective for JAK1 or JAK1 and JAK2. JAKAFI is the most advanced compound in our JAK program. It is an oral JAK1 and JAK2 inhibitor.

JAKAFI is marketed in the United States through our own specialty sales force and commercial team. JAKAFI was the first FDA-approved JAK inhibitor for any indication, was the first FDA-approved product in MF, PV and steroid-refractory acute GVHD, and was recently approved in steroid-refractory chronic GVHD. JAKAFI remains the first-line standard of care in MF and remains the only FDA-approved product for steroid-refractory acute GVHD. The FDA has granted JAKAFI orphan drug status for MF, PV and GVHD.

JAKAFI is distributed primarily through a network of specialty pharmacy providers and wholesalers that allow for efficient delivery of the medication by mail directly to patients or direct delivery to the patient’s pharmacy. Our distribution process uses a model that is well-established and familiar to physicians who practice within the oncology field.

To further support appropriate use and future development of JAKAFI, our U.S. Medical Affairs department is responsible for providing appropriate scientific and medical education and information to physicians, preparing scientific presentations and publications, and overseeing the process for supporting investigator sponsored trials.

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In September 2023, we were notified by the Centers for Medicare and Medicaid Services (CMS) that ruxolitinib phosphate qualified for the Small Biotech Exception.

Myelofibrosis. MF is a rare, life-threatening condition. MF, considered the most serious of the myeloproliferative neoplasms, can occur e