Incyte Corp 10-Q for FY2020 Q2

Incyte Corp (INCY)

10-Q 2020-08-04 For: 2020-06-30

Added on April 07, 2026

About this 10-Q

Incyte Corp filed this 10-Q on August 4, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $688.04M; up 29.8% from $529.93M a year earlier
Net income: $290.3M; up 175.6% from net income of $105.32M a year earlier
Diluted EPS: $1.32; up 175.0% from $0.48 a year earlier

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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)



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


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		Emerging growth company ☐

0
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	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	68

Item 4.	Controls and Procedures	68

PART II: OTHER INFORMATION

Item 1A.	Risk Factors	69

Item 6.	Exhibits	95

	Signatures	96


	June 30,		December 31,
	2020		2019*
ASSETS
Current assets:
Cash and cash equivalents	$	1,326,730	$	1,832,684
Marketable securities—available-for-sale (amortized cost $262,556; allowance for credit losses $0)		262,756		284,870
Accounts receivable		420,250		308,809
Inventory		16,335		11,400
Prepaid expenses and other current assets		51,554		43,725
Total current assets		2,077,625		2,481,488

Restricted cash and investments		2,583		1,023
Long term investments		248,731		133,657
Inventory		9,554		5,105
Property and equipment, net		453,777		377,567
Finance lease right-of-use assets, net		28,133		29,058
Other intangible assets, net		183,060		193,828
Goodwill		155,593		155,593
Other assets, net		53,265		49,431
Total assets	$	3,212,321	$	3,426,750

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	90,909	$	83,647
Accrued compensation		67,396		90,706
Interest payable		29		29
Accrued and other current liabilities		340,890		285,950
Finance lease liabilities		1,189		664
Convertible senior notes		18,588		18,300
Acquisition-related contingent consideration		37,512		34,044
Total current liabilities		556,513		513,340

Acquisition-related contingent consideration		236,488		242,956
Finance lease liabilities		31,917		31,918
Other liabilities		42,799		40,130
Total liabilities		867,717		828,344

Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding as of June 30, 2020 and December 31, 2019		—		—
Common stock, $0.001 par value; 400,000,000 shares authorized; 218,069,218 and 216,177,830 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		218		216
Additional paid-in capital		4,217,911		4,044,490
Accumulated other comprehensive loss		(12,423)		(15,542)
Accumulated deficit		(1,861,102)		(1,430,758)
Total stockholders’ equity		2,344,604		2,598,406
Total liabilities and stockholders’ equity	$	3,212,321	$	3,426,750


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenues:
Product revenues, net	$	500,290	$	433,897	$	987,017	$	830,146
Product royalty revenues		92,753		76,035		174,533		137,643
Milestone and contract revenues		95,000		20,000		95,000		60,000

Total revenues		688,043		529,932		1,256,550		1,027,789

Costs and expenses:
Cost of product revenues (including definite-lived intangible amortization)		33,364		29,406		60,683		51,994
Research and development		286,601		289,363		1,371,888		559,908
Selling, general and administrative		117,998		105,943		229,146		229,926
Change in fair value of acquisition-related contingent consideration		6,054		6,608		12,681		13,279
Collaboration loss sharing		13,253		—		15,383		—

Total costs and expenses		457,270		431,320		1,689,781		855,107

Income (loss) from operations		230,773		98,612		(433,231)		172,682
Other income (expense), net		4,817		15,000		13,479		24,373
Interest expense		(600)		(316)		(1,202)		(651)
Unrealized gain (loss) on long term investments		72,274		(4,625)		24,142		16,364

Income (loss) before provision for income taxes		307,264		108,671		(396,812)		212,768

Provision for income taxes		16,966		3,353		33,532		5,138

Net income (loss)	$	290,298	$	105,318	$	(430,344)	$	207,630

Net income (loss) per share:
Basic	$	1.33	$	0.49	$	(1.98)	$	0.97
Diluted	$	1.32	$	0.48	$	(1.98)	$	0.96

Shares used in computing net income (loss) per share:
Basic		217,549		214,620		217,135		214,342
Diluted		220,434		217,483		217,135		217,274


	For the Six Months Ended June 30, 2020
									Total
	Common		Additional		Accumulated Other		Accumulated		Stockholders’
	Stock		Paid-in Capital		Comprehensive Loss		Deficit		Equity
Balances at January 1, 2020	$	216	$	4,044,490	$	(15,542)	$	(1,430,758)	$	2,598,406
Issuance of 772,538 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units		1		14,618		—		—		14,619
Issuance of 1,957 shares of Common Stock for services rendered		—		145		—		—		145
Stock compensation		—		42,758		—		—		42,758
Other comprehensive income		—		—		2,435		—		2,435
Net loss		—		—		—		(720,642)		(720,642)
Balances at March 31, 2020	$	217	$	4,102,011	$	(13,107)	$	(2,151,400)	$	1,937,721
Issuance of 936,688 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and 175,615 shares of Common Stock under the ESPP		1		69,193		—		—		69,194
Issuance of 1,403 shares of Common Stock for services rendered		—		139		—		—		139
Issuance of 3,187 shares of Common Stock upon conversion of Convertible Senior Notes due 2020		—		162		—		—		162
Stock compensation		—		46,406		—		—		46,406
Other comprehensive income		—		—		684		—		684
Net income		—		—		—		290,298		290,298
Balances at June 30, 2020	$	218	$	4,217,911	$	(12,423)	$	(1,861,102)	$	2,344,604


	For the Six Months Ended June 30, 2019
									Total
	Common		Additional		Accumulated Other		Accumulated		Stockholders’
	Stock		Paid-in Capital		Comprehensive Loss		Deficit		Equity
Balances at January 1, 2019	$	213	$	3,813,678	$	(10,165)	$	(1,877,759)	$	1,925,967
Issuance of 1,044,745 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units		1		15,480		—		—		15,481
Issuance of 1,200 shares of Common Stock for services rendered		—		104		—		—		104
Stock compensation		—		40,690		—		—		40,690
Adoption of ASU No. 2016-02		—		—		—		95		95
Other comprehensive income		—		—		918		—		918
Net income		—		—		—		102,312		102,312
Balances at March 31, 2019	$	214	$	3,869,952	$	(9,247)	$	(1,775,352)	$	2,085,567
Issuance of 400,292 shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and 143,379 shares of Common Stock under the ESPP		1		15,190		—		—		15,191
Issuance of 1,444 shares of Common Stock for services rendered		—		123		—		—		123
Stock compensation		—		40,710		—		—		40,710
Other comprehensive income		—		—		282		—		282
Net income		—		—		—		105,318		105,318
Balances at June 30, 2019	$	215	$	3,925,975	$	(8,965)	$	(1,670,034)	$	2,247,191


	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, 2020
Cash and cash equivalents	$	1,326,730	$	—	$	—	$	1,326,730
Debt securities (government)		—		262,756		—		262,756
Long term investments (Note 9)		248,731		—		—		248,731
Total assets	$	1,575,461	$	262,756	$	—	$	1,838,217


	2020
Balance at January 1,	$	277,000
Contingent consideration earned during the period but not yet paid		(7,054)
Payments made during the period		(8,627)
Change in fair value of contingent consideration		12,681
Balance at June 30,	$	274,000


			Net
	Amortized		Unrealized		Estimated
	Cost		Gains		Fair Value
June 30, 2020
Debt securities (government)	$	262,556	$	200	$	262,756

December 31, 2019
Debt securities (government)	$	284,795	$	75	$	284,870


	Percentage of Total Net				Percentage of Total Net
	Product Revenues for the				Product Revenues for the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Customer A	20	%	20	%	19	%	19	%
Customer B	14	%	13	%	13	%	14	%
Customer C	16	%	16	%	17	%	16	%
Customer D	11	%	11	%	11	%	12	%


		Remainder of
		2020		2021		2022		2023		2024		Thereafter
Amortization expense	$	10,768	$	21,536	$	21,536	$	21,536	$	21,536	$	86,148


	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,
	2020		2019		2020		2019		2020		2019		2020		2019
Average risk-free interest rates	0.33	%	2.26	%	1.32	%	2.49	%	0.16	%	1.75	%	0.19	%	2.10	%
Average expected life (in years)	5.48		5.55		4.80		5.34		0.50		0.50		0.50		0.50
Volatility	39	%	39	%	40	%	45	%	38	%	37	%	48	%	34	%
Weighted-average fair value (in dollars)	34.13		30.92		29.49		31.47		19.50		13.11		17.47		13.69


	Shares Subject to
	Outstanding Options
		Weighted Average
	Shares	Exercise Price
Balance at December 31, 2019	12,632,657	$	81.42
Options granted	1,123,442	$	83.01
Options exercised	(1,602,004)	$	49.13
Options cancelled	(274,941)	$	93.91
Balance at June 30, 2020	11,879,154	$	85.63


	Six Months Ended
	June 30,
	2020		2019
Cash flows from operating activities:
Net income (loss)	$	(430,344)	$	207,630
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,692		27,326
Stock-based compensation		88,816		81,207
Other, net		8,567		227
Unrealized gain on long term investments		(24,142)		(16,364)
Change in fair value of acquisition-related contingent consideration		12,681		13,279
Changes in operating assets and liabilities:
Accounts receivable		(119,724)		4,918
Prepaid expenses and other assets		(11,663)		8,354
Inventory		(9,384)		(2,288)
Accounts payable		7,262		(32,243)
Accrued and other liabilities		38,204		16,577
Net cash (used in) provided by operating activities		(414,035)		308,623
Cash flows from investing activities:
Purchase of long term investments		(95,468)		—
Sale of long term investment		4,536		—
Capital expenditures		(83,125)		(65,561)
Purchases of marketable securities		(287,419)		(103,970)
Sale and maturities of marketable securities		309,658		99,821
Net cash used in investing activities		(151,818)		(69,710)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock plans		83,813		30,672
Payment of finance lease liabilities		(387)		(409)
Payment of contingent consideration		(24,520)		(16,766)
Net cash provided by financing activities		58,906		13,497
Effect of exchange rates on cash, cash equivalents, restricted cash and investments		2,553		(158)
Net (decrease) increase in cash, cash equivalents, restricted cash and investments		(504,394)		252,252
Cash, cash equivalents, restricted cash and investments at beginning of period		1,833,707		1,164,986
Cash, cash equivalents, restricted cash and investments at end of period	$	1,329,313	$	1,417,238
Supplemental Schedule of Cash Flow Information
Interest paid	$	119	$	119
Income taxes paid	$	24,165	$	6,439
Reclassification to common stock and additional paid in capital in connection with conversions of 1.25% convertible senior notes due 2020	$	162	$	—
Unpaid purchases of property and equipment	$	14,817	$	—


	June 30,		December 31,
	2020		2019
Raw materials	$	1,275	$	1,275
Work-in-process		10,619		8,634
Finished goods		13,995		6,596
		25,889		16,505
Inventories-current		16,335		11,400
Inventories-noncurrent	$	9,554	$	5,105


	June 30,		December 31,
	2020		2019
Office equipment	$	14,482	$	15,303
Laboratory equipment		72,915		70,510
Computer equipment		59,642		59,069
Land		10,294		10,203
Building and leasehold improvements		206,498		208,293
Operating lease right-of-use assets		23,532		19,672
Construction in progress		196,850		116,387
		584,213		499,437
Less accumulated depreciation and amortization		(130,436)		(121,870)
Property and equipment, net	$	453,777	$	377,567


	Shares Subject to
	Outstanding Awards
	Shares	Grant Date Value
Balance at December 31, 2019	2,602,376	$	79.69
RSUs granted	415,017	$	81.56
RSUs released	(92,818)	$	85.93
RSUs cancelled	(62,956)	$	80.10
PSUs cancelled	(142,250)	$	68.79
Balance at June 30, 2020	2,719,369	$	80.33


		Shares Available
		for Grant
Balance at December 31, 2019		9,882,122
Options, RSUs and PSUs granted		(1,953,476)
Options, RSUs and PSUs cancelled		506,744
Balance at June 30, 2020		8,435,390


				Carrying Amount,
	Interest Rates			June 30,		December 31,
Debt	June 30, 2020		Maturities	2020		2019
1.25% Convertible Senior Notes due 2020	1.25	%	2020	$	18,588	$	18,300


	June 30, 2020				December 31, 2019
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
1.25% Convertible Senior Notes due 2020	$	18,588	$	38,298	$	18,300	$	32,511


	Indication and status
ruxolitinib (JAK1/JAK2)	Steroid-refractory chronic GVHD: Phase III (REACH3)¹Primary endpoint met Refractory myelofibrosis: Phase III with parsaclisib (PI3Kδ) in preparation; Phase II with INCB57643 (BET) in preparation Myelofibrosis: Phase II with INCB00928 (ALK2) in preparation
Once-a-day ruxolitinib (JAK1/JAK2)	Myelofibrosis and polycythemia vera: clinical pharmacology studies
itacitinib (JAK1)	Treatment-naïve chronic GVHD: Phase III (GRAVITAS-309)
pemigatinib (FGFR)	Cholangiocarcinoma: Phase II (FIGHT-202), Phase III (FIGHT-302); MAA under review Bladder cancer: Phase II (FIGHT-201, FIGHT-205) 8p11 MPN: Phase II (FIGHT-203) Tumor agnostic: Phase II (FIGHT-207)
tafasitamab (CD19)²	r/r DLBCL: Phase II (L-MIND); Phase III (B-MIND); MAA under review 1L DLBCL: Phase Ib (First-MIND)
parsaclisib (PI3Kδ)	Follicular lymphoma: Phase II (CITADEL-203) Marginal zone lymphoma: Phase II (CITADEL-204) Mantle cell lymphoma: Phase II (CITADEL-205)
retifanlimab (PD-1)³	MSI-high endometrial cancer: Phase II (POD1UM-101) Merkel cell carcinoma: Phase II (POD1UM-201) SCAC: Phase II (POD1UM-202); Phase III (PODIUM-303) in preparation NSCLC: Phase III (POD1UM-304) in preparation


Modality	Candidates
Small molecules	INCB01158 (ARG)¹, INCB81776 (AXL/MER), epacadostat (IDO1), INCB86550 (PD-L1)
Monoclonal antibodies²	INCAGN1876 (GITR), INCAGN2385 (LAG-3), INCAGN1949 (OX40), INCAGN2390 (TIM-3)
Bispecific antibodies	MCLA-145 (PD-L1xCD137)³

	Indication and status
ruxolitinib cream¹ (JAK1/JAK2)	Atopic dermatitis: Phase III (TRuE-AD1, TRuE-AD2; primary endpoints met) Vitiligo: Phase III (TRuE-V1, TRuE-V2)
INCB54707 (JAK1)	Hidradenitis suppurativa: Phase II
parsaclisib (PI3Kδ)	Autoimmune hemolytic anemia: Phase II
INCB00928 (ALK2)	Fibrodysplasia ossificans progressiva: Phase II in preparation



	Indication and status
baricitinib (JAK1/JAK2)¹	Atopic dermatitis: Phase III (BREEZE-AD) Systemic lupus erythematosus: Phase III Severe alopecia areata: Phase III (BRAVE-AA1)
capmatinib (MET)²	NSCLC (with MET exon 14 skipping mutations): FDA and MHLW approved


	For the Three Months Ended,				For the Six Months Ended,
	June 30,				June 30,
	2020		2019		2020		2019

	(in millions)				(in millions)
JAKAFI revenues, net	$	473.7	$	409.5	$	933.2	$	785.1
ICLUSIG revenues, net		22.8		24.4		50.0		45.0
PEMAZYRE revenues, net		3.8		—		3.8		—
Total product revenues, net		500.3		433.9		987.0		830.1
JAKAVI product royalty revenues		66.2		56.9		122.6		102.5
OLUMIANT product royalty revenues		25.8		19.1		51.3		35.2
TABRECTA product royalty revenues		0.7		—		0.7		—
Total product royalty revenues		92.7		76.0		174.6		137.7
Milestone and contract revenues		95.0		20.0		95.0		60.0
Total revenues	$	688.0	$	529.9	$	1,256.6	$	1,027.8


					Co-Pay
	Discounts and		Government		Assistance
	Distribution		Rebates and		and Other		Product
Six Months Ended June 30, 2020	Fees		Chargebacks		Discounts		Returns		Total
Balance at January 1, 2020	$	6,530	$	54,762	$	703	$	1,660	$	63,655
Allowances for current period sales		28,144		167,522		8,731		662		205,059
Allowances for prior period sales		(160)		485		—		(596)		(271)
Credits/payments for current period sales		(21,898)		(127,476)		(7,513)		—		(156,887)
Credits/payments for prior period sales		(5,753)		(30,174)		(252)		(226)		(36,405)
Balance at June 30, 2020	$	6,863	$	65,119	$	1,669	$	1,500	$	75,151


			Less Than		Years		Years		Over
	Total		1 Year		2 - 3		4 - 5		5 Years
Contractual Obligations:
Principal on convertible senior debt	$	18.9	$	18.9	$	—	$	—	$	—
Interest on convertible senior debt		0.1		0.1		—		—		—
Finance lease liabilities		44.0		1.9		5.9		5.6		30.6
Operating lease liabilities		27.4		11.0		9.9		2.1		4.4
Other non-cancelable obligations		3.2		1.6		1.5		0.1		—
Total contractual obligations	$	93.6	$	33.5	$	17.3	$	7.8	$	35.0


Exhibit Number		Description of Document
10.1†*		Letter agreement, dated May 13, 2020, between the Company and Eli Lilly and Company, together with related Letter of Understanding, dated March 5, 2020, between the Company and Eli Lilly and Company, each relating to License, Development and Commercialization Agreement entered into as of December 18, 2009 by and between the Company and Eli Lilly and Company.

31.1*		Rule 13a-14(a) Certification of Chief Executive Officer

31.2*		Rule 13a-14(a) Certification of Chief Financial Officer

32.1**		Statement of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

32.2**		Statement of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

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*		Filed herewith.

**		In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.
†	Portions of this exhibit have been omitted pursuant to Item 601(b)(10(iv) of Regulation S-K.


	INCYTE CORPORATION

Dated: August 4, 2020	By:	/s/ HERVÉ HOPPENOT
		Hervé Hoppenot
		Chairman, President, and Chief Executive Officer
		(Principal Executive Officer)

Dated: August 4, 2020	By:	/s/ CHRISTIANA STAMOULIS
		Christiana Stamoulis
		Chief Financial Officer
		(Principal Financial Officer)




			Incyte Corporation
			1801 Augustine Cut-Off
			Wilmington, DE 19803
		Tel	302.498.6700
		Web	www.incyte.com


Sincerely,
INCYTE CORPORATION

/s/ Vijay Iyengar

By:	Vijay Iyengar
Title:	Executive Vice President, Global Strategy and Corporate Development

Acknowledged and Agreed:
ELI LILLY AND COMPANY

/s/ Anabela Cardoso

By:	Anabela Cardoso
Title:	Global Brand Development Leader, Immunology

cc:		Eli Lilly and Company
		Lilly Corporate Center
		Indianapolis, IN 46285
		Attention:	Vice President and President, Established Markets
		Attention:	General Patent Counsel




			Incyte Corporation
			1801 Augustine Cut-Off
			Wilmington, DE 19803
		Tel	302.498.6700
		Web	www.incyte.com

3
	/s/ HERVÉ HOPPENOT

	Hervé Hoppenot
	Chief Executive Officer
	August 4, 2020