UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

or

☐ 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.  ⌧ Yes  ◻ 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).  ⌧ Yes  ◻ 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 ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

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. ☐

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

The number of outstanding shares of the registrant’s Common Stock, $.001 par value, was 222,430,635 as of July 26, 2022.

INCYTE CORPORATION

INDEX

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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	28
	Forward-Looking Statements	28
	Summary Risk Factors	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4.	Controls and Procedures	56
PART II: OTHER INFORMATION
Item 1A.	Risk Factors	56
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,		December 31,
	2022		2021*
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,435,381	$	2,057,440
Marketable securities—available-for-sale (amortized cost $292,350 and $291,871 as of June 30, 2022 and December 31, 2021, respectively; allowance for credit losses $0 as of June 30, 2022 and December 31, 2021)		287,044		290,752
Accounts receivable		682,968		616,300
Inventory		54,502		27,904
Prepaid expenses and other current assets		165,950		126,278
Total current assets		3,625,845		3,118,674
Restricted cash and investments		1,644		1,720
Long term investments		149,784		221,266
Inventory		39,626		29,034
Property and equipment, net		721,328		723,920
Finance lease right-of-use assets, net		27,349		27,548
Other intangible assets, net		139,987		150,755
Goodwill		155,593		155,593
Deferred income tax asset		434,867		467,538
Other assets, net		23,012		37,304
Total assets	$	5,319,035	$	4,933,352
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	194,770	$	172,110
Accrued compensation		93,145		108,962
Accrued and other current liabilities		598,808		533,595
Finance lease liabilities		3,036		2,635
Acquisition-related contingent consideration		36,915		37,006
Total current liabilities		926,674		854,308
Acquisition-related contingent consideration		200,085		206,994
Finance lease liabilities		31,157		31,632
Other liabilities		76,058		70,414
Total liabilities		1,233,974		1,163,348
Commitments and contingencies (Note 14)
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; 221,875,396 and 221,084,433 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		222		221
Additional paid-in capital		4,688,985		4,567,111
Accumulated other comprehensive loss		(25,696)		(19,454)
Accumulated deficit		(578,450)		(777,874)
Total stockholders’ equity		4,085,061		3,770,004
Total liabilities and stockholders’ equity	$	5,319,035	$	4,933,352

*   The condensed consolidated balance sheet at December 31, 2021 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				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues:
Product revenues, net	$	663,851	$	575,150	$	1,269,672	$	1,079,961
Product royalty revenues		117,546		120,559		239,960		220,466
Milestone and contract revenues		130,000		10,000		135,000		10,000
Total revenues		911,397		705,709		1,644,632		1,310,427
Costs and expenses:
Cost of product revenues (including definite-lived intangible amortization)		50,636		38,028		93,250		67,248
Research and development		347,196		343,511		700,569		650,407
Selling, general and administrative		253,277		168,859		462,861		322,654
Change in fair value of acquisition-related contingent consideration		3,313		4,632		9,695		10,158
Collaboration loss sharing		2,544		9,843		7,286		20,327
Total costs and expenses		656,966		564,873		1,273,661		1,070,794
Income from operations		254,431		140,836		370,971		239,633
Other income (expense), net		522		4,390		1,782		2,983
Interest expense		(678)		(358)		(1,358)		(717)
Unrealized (loss) gain on long term investments		(24,897)		26,765		(71,482)		(944)
Income before provision for income taxes		229,378		171,633		299,913		240,955
Provision for income taxes		67,946		22,177		100,489		37,964
Net income	$	161,432	$	149,456	$	199,424	$	202,991
Net income per share:
Basic	$	0.73	$	0.68	$	0.90	$	0.92
Diluted	$	0.72	$	0.67	$	0.89	$	0.91
Shares used in computing net income per share:
Basic		221,660		220,083		221,493		219,942
Diluted		223,661		222,250		223,277		222,061

See accompanying notes.

4

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net income	$	161,432	$	149,456	$	199,424	$	202,991
Other comprehensive income (loss):
Foreign currency translation (loss) gain		(1,837)		1,876		(2,619)		(3,432)
Unrealized loss on marketable securities, net of tax		(1,094)		(133)		(4,187)		(165)
Defined benefit pension gain, net of tax		282		342		564		684
Other comprehensive income (loss)		(2,649)		2,085		(6,242)		(2,913)
Comprehensive income	$	158,783	$	151,541	$	193,182	$	200,078

See accompanying notes.

5

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands, except number of shares)

									Total
	Common		Additional		Accumulated Other		Accumulated		Stockholders’
	Stock		Paid-in Capital		Comprehensive Loss		Deficit		Equity
Balances at January 1, 2022	$	221	$	4,567,111	$	(19,454)	$	(777,874)	$	3,770,004
Issuance of 323,582 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes		—		14,237		—		—		14,237
Issuance of 1,535 shares of Common Stock for services rendered		—		112		—		—		112
Stock compensation		—		44,320		—		—		44,320
Other comprehensive loss		—		—		(3,593)		—		(3,593)
Net income		—		—		—		37,992		37,992
Balances at March 31, 2022	$	221	$	4,625,780	$	(23,047)	$	(739,882)	$	3,863,072
Issuance of 274,693 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 189,684 shares of Common Stock under the ESPP		1		16,600		—		—		16,601
Issuance of 1,469 shares of Common Stock for services rendered		—		109		—		—		109
Stock compensation		—		46,496		—		—		46,496
Other comprehensive income		—		—		(2,649)		—		(2,649)
Net income		—		—		—		161,432		161,432
Balances at June 30, 2022	$	222	$	4,688,985	$	(25,696)	$	(578,450)	$	4,085,061

6

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(unaudited, in thousands, except number of shares)

									Total
	Common		Additional		Accumulated Other		Accumulated		Stockholders’
	Stock		Paid-in Capital		Comprehensive Loss		Deficit		Equity
Balances at January 1, 2021	$	219	$	4,352,864	$	(15,360)	$	(1,726,455)	$	2,611,268
Issuance of 389,512 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes		1		20,027		—		—		20,028
Issuance of 1,357 shares of Common Stock for services rendered		—		108		—		—		108
Stock compensation		—		47,903		—		—		47,903
Other comprehensive loss		—		—		(4,998)		—		(4,998)
Net income		—		—		—		53,535		53,535
Balances at March 31, 2021	$	220	$	4,420,902	$	(20,358)	$	(1,672,920)	$	2,727,844
Issuance of 390,001 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 153,082 shares of Common Stock under the ESPP		—		11,016		—		—		11,016
Issuance of 1,288 shares of Common Stock for services rendered		—		109		—		—		109
Stock compensation		—		45,351		—		—		45,351
Other comprehensive income		—		—		2,085		—		2,085
Net income		—		—		—		149,456		149,456
Balances at June 30, 2021	$	220	$	4,477,378	$	(18,273)	$	(1,523,464)	$	2,935,861

See accompanying notes.

7

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Six Months Ended
	June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	199,424	$	202,991
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,945		28,295
Stock-based compensation		90,337		92,090
Deferred income taxes		32,475		(160)
Other, net		8,467		3,214
Unrealized loss on long term investments		71,482		944
Change in fair value of acquisition-related contingent consideration		9,695		10,158
Changes in operating assets and liabilities:
Accounts receivable		(66,668)		43,824
Prepaid expenses and other assets		(25,380)		(2,981)
Inventory		(37,190)		(16,287)
Accounts payable		22,660		23,333
Accrued and other liabilities		51,651		(6,382)
Net cash provided by operating activities		389,898		379,039
Cash flows from investing activities:
Purchase of long term investments		—		(8,662)
Sale of long term investments		—		9,328
Capital expenditures		(28,749)		(114,390)
Purchases of marketable securities		(43,988)		(102,288)
Sale and maturities of marketable securities		43,509		107,114
Net cash used in investing activities		(29,228)		(108,898)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock plans		37,692		43,669
Tax withholdings related to restricted and performance share vesting		(6,854)		(12,625)
Payment of finance lease liabilities		(1,368)		(1,173)
Payment of contingent consideration		(13,473)		(13,357)
Net cash provided by financing activities		15,997		16,514
Effect of exchange rates on cash, cash equivalents, restricted cash and investments		1,198		(2,159)
Net increase in cash, cash equivalents, restricted cash and investments		377,865		284,496
Cash, cash equivalents, restricted cash and investments at beginning of period		2,059,160		1,514,765
Cash, cash equivalents, restricted cash and investments at end of period	$	2,437,025	$	1,799,261
Supplemental Schedule of Cash Flow Information
Income taxes paid	$	76,464	$	35,996
Unpaid purchases of property and equipment	$	8,952	$	30,823
Leased assets obtained in exchange for new operating lease liabilities	$	2,025	$	7,217
Leased assets obtained in exchange for new finance lease liabilities	$	1,308	$	408

See accompanying notes.

8

INCYTE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(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) and MONJUVI® (tafasitamab-cxix), which is co-commercialized. 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, 2022, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and six months ended June 30, 2022 and 2021, and the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, 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, 2021 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.

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, 2021.

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

There were no new accounting pronouncements issued nor adopted since our filing of the Annual Report on Form 10-K for the year ended December 31, 2021, which could have a significant effect on our condensed consolidated financial statements.

9

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				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
JAKAFI revenues, net	$	597,673	$	529,055	$	1,142,137	$	994,765
ICLUSIG revenues, net		26,224		28,189		52,293		53,834
PEMAZYRE revenues, net		18,983		17,906		37,015		31,362
MINJUVI revenues, net		4,411		—		8,913		—
OPZELURA revenues, net		16,560		—		29,314		—
Total product revenues, net		663,851		575,150		1,269,672		1,079,961
JAKAVI product royalty revenues		83,711		82,038		154,578		147,640
OLUMIANT product royalty revenues		30,254		36,045		78,318		68,303
TABRECTA product royalty revenues		3,581		2,476		7,064		4,523
Total product royalty revenues		117,546		120,559		239,960		220,466
Milestone and contract revenues		130,000		10,000		135,000		10,000
Total revenues	$	911,397	$	705,709	$	1,644,632	$	1,310,427

For further information on our revenue-generating contracts, refer to Note 7.  

Note 4.     Fair value of financial instruments

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

			Net
	Amortized		Unrealized		Estimated
	Cost		Losses		Fair Value
June 30, 2022
Debt securities (government)	$	292,350	$	(5,306)	$	287,044
December 31, 2021
Debt securities (government)	$	291,871	$	(1,119)	$	290,752

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, 2022 and December 31, 2021, 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.

10

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.

At June 30, 2022 and December 31, 2021, our Level 2 U.S. government debt securities were valued using readily available pricing sources which utilize market observable inputs, including the current interest rate and other characteristics for similar types of investments. Our long term investments classified as Level 1 were valued using their respective closing stock prices on The Nasdaq Stock Market.  We did not experience any transfers of financial instruments between the fair value hierarchy levels during the six months ended June 30, 2022.

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		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2022
Cash and cash equivalents	$	2,435,381	$	—	$	—	$	2,435,381
Debt securities (government)		—		287,044		—		287,044
Long term investments (Note 7)		149,784