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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 September 30, 2021

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 220,890,618 as of October 26, 2021.

INCYTE CORPORATION

INDEX

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

8

Notes to Condensed Consolidated Financial Statements

9

Item 2.

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

41

Forward-Looking Statements

41

Summary Risk Factors

44

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

70

Item 4.

Controls and Procedures

70

PART II: OTHER INFORMATION

Item 1A.

Risk Factors

70

Item 6.

Exhibits

98

Signatures

99

2

PART I:    FINANCIAL INFORMATION

Item 1.    Financial Statements

INCYTE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

September 30,

December 31,

    

2021

    

2020*

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

1,999,021

$

1,513,008

Marketable securities—available-for-sale (amortized cost $285,135 and $288,199 as of September 30, 2021 and December 31, 2020; allowance for credit losses $0 and $0 as of September 30, 2021 and December 31, 2020)

 

285,054

 

288,369

Accounts receivable

 

516,689

 

481,994

Inventory

 

21,303

 

16,425

Prepaid expenses and other current assets

101,730

 

60,098

Total current assets

 

2,923,797

 

2,359,894

Restricted cash and investments

 

1,682

1,757

Long term investments

 

192,096

222,301

Inventory

 

30,885

19,548

Property and equipment, net

 

686,718

559,625

Finance lease right-of-use assets, net

27,133

28,451

Other intangible assets, net

156,139

172,291

Goodwill

155,593

155,593

Other assets, net

 

24,788

41,458

Total assets

$

4,198,831

$

3,560,918

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

114,509

$

98,767

Accrued compensation

 

105,705

 

113,340

Accrued and other current liabilities

 

481,879

 

378,404

Finance lease liabilities

2,400

2,284

Acquisition-related contingent consideration

38,219

38,400

Total current liabilities

 

742,712

 

631,195

Acquisition-related contingent consideration

213,781

227,600

Finance lease liabilities

31,376

32,573

Other liabilities

 

62,305

58,282

Total liabilities

 

1,050,174

 

949,650

Commitments and contingencies (Note 15)

Stockholders’ equity:

Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding as of September 30, 2021 and December 31, 2020

 

 

Common stock, $0.001 par value; 400,000,000 shares authorized; 220,885,119 and 219,489,329 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

221

219

Additional paid-in capital

 

4,508,807

4,352,864

Accumulated other comprehensive loss

 

(18,646)

(15,360)

Accumulated deficit

 

(1,341,725)

(1,726,455)

Total stockholders’ equity

 

3,148,657

 

2,611,268

Total liabilities and stockholders’ equity

$

4,198,831

$

3,560,918

*   The condensed consolidated balance sheet at December 31, 2020 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

Nine Months Ended

September 30,

September 30,

    

2021

    

2020

    

2021

    

2020

 

Revenues:

Product revenues, net

$

594,013

$

522,252

$

1,673,974

$

1,509,269

Product royalty revenues

 

183,974

 

98,391

 

404,440

 

272,924

Milestone and contract revenues

 

35,000

 

 

45,000

 

95,000

Total revenues

 

812,987

 

620,643

 

2,123,414

 

1,877,193

Costs and expenses:

Cost of product revenues (including definite-lived intangible amortization)

 

39,869

34,322

107,117

95,005

Research and development

 

334,945

438,109

985,352

1,809,997

Selling, general and administrative

 

190,704

120,788

513,358

349,934

Change in fair value of acquisition-related contingent consideration

2,910

7,109

13,068

19,790

Collaboration loss sharing

9,149

14,989

29,476

30,372

Total costs and expenses

 

577,577

 

615,317

 

1,648,371

 

2,305,098

Income (loss) from operations

 

235,410

 

5,326

 

475,043

 

(427,905)

Other income (expense), net

 

1,948

4,917

4,931

18,396

Interest expense

 

(439)

(544)

(1,156)

(1,746)

Unrealized gain (loss) on long term investments

 

(27,450)

(13,207)

(28,394)

10,935

Income (loss) before provision for income taxes

 

209,469

 

(3,508)

 

450,424

 

(400,320)

Provision for income taxes

 

27,730

11,695

65,694

45,227

Net income (loss)

$

181,739

$

(15,203)

$

384,730

$

(445,547)

Net income (loss) per share:

Basic

$

0.82

$

(0.07)

$

1.75

$

(2.05)

Diluted

$

0.82

$

(0.07)

$

1.73

$

(2.05)

Shares used in computing net income (loss) per share:

Basic

220,845

218,784

220,243

217,684

Diluted

222,248

218,784

222,113

217,684

See accompanying notes.

4

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

    

2021

    

2020

    

2021

    

2020

 

Net income (loss)

$

181,739

$

(15,203)

$

384,730

$

(445,547)

Other comprehensive income (loss):

Foreign currency translation (loss) gain

(629)

2,532

(4,061)

5,085

Unrealized (loss) gain on marketable securities, net of tax

 

(86)

(77)

(251)

48

Defined benefit pension obligations, net of tax

342

220

1,026

661

Other comprehensive income (loss)

 

(373)

 

2,675

 

(3,286)

 

5,794

Comprehensive income (loss)

$

181,366

$

(12,528)

$

381,444

$

(439,753)

See accompanying notes.

5

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands, except number of shares)

For the Nine Months Ended September 30, 2021

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, 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

Issuance of 459,084 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

 

1

(11,993)

(11,992)

Issuance of 1,466 shares of Common Stock for services rendered

108

108

Stock compensation

 

43,314

43,314

Other comprehensive loss

 

 

 

(373)

 

 

(373)

Net income

 

 

 

 

181,739

 

181,739

Balances at September 30, 2021

$

221

$

4,508,807

$

(18,646)

$

(1,341,725)

$

3,148,657

6

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(unaudited, in thousands, except number of shares)

For the Nine Months Ended September 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, net of shares withheld for taxes

 

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, net of shares withheld for taxes 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

Issuance of 698,032 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

 

1

7,782

7,783

Issuance of 1,434 shares of Common Stock for services rendered

131

131

Issuance of 134,413 shares of Common Stock upon conversion of Convertible Senior Notes due 2020

6,873

6,873

Stock compensation

 

43,970

43,970

Other comprehensive income

 

 

 

2,675

 

 

2,675

Net loss

 

 

 

 

(15,203)

 

(15,203)

Balances at September 30, 2020

$

219

$

4,276,667

$

(9,748)

$

(1,876,305)

$

2,390,833

See accompanying notes.

7

INCYTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Nine Months Ended

September 30,

    

2021

    

2020

 

Cash flows from operating activities:

Net income (loss)

$

384,730

$

(445,547)

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

42,986

38,641

Stock-based compensation

 

134,784

132,616

Deferred income taxes

(178)

Other, net

5,268

8,698

Unrealized loss (gain) on long term investments

 

28,394

(10,935)

Change in fair value of acquisition-related contingent consideration

13,068

19,790

Changes in operating assets and liabilities:

Accounts receivable

 

(34,695)

(55,656)

Prepaid expenses and other assets

 

(24,784)

(11,384)

Inventory

 

(16,215)

(9,204)

Accounts payable

 

15,742

38,865

Accrued and other liabilities

 

85,037

62,196

Net cash provided by (used in) operating activities

 

634,137

 

(231,920)

Cash flows from investing activities:

Purchase of long term investments

 

(8,662)

 

(95,468)

Sale of long term investments

10,473

17,250

Capital expenditures

 

(146,543)

 

(135,946)

Purchases of marketable securities

 

(228,170)

 

(418,698)

Sale and maturities of marketable securities

 

231,250

 

466,591

Net cash used in investing activities

 

(141,652)

 

(166,271)

Cash flows from financing activities:

Proceeds from issuance of common stock under stock plans net of tax withholding

 

19,052

91,596

Payment of finance lease liabilities

 

(1,788)

(619)

Payment of contingent consideration

(20,093)

(31,140)

Net cash (used in) provided by financing activities

 

(2,829)

 

59,837

Effect of exchange rates on cash, cash equivalents, restricted cash and investments

(3,718)

5,085

Net increase (decrease) in cash, cash equivalents, restricted cash and investments

 

485,938

 

(333,269)

Cash, cash equivalents, restricted cash and investments at beginning of period

1,514,765

1,833,707

Cash, cash equivalents, restricted cash and investments at end of period

$

2,000,703

$

1,500,438

Supplemental Schedule of Cash Flow Information

Interest paid

$

$

119

Income taxes paid

$

45,872

$

56,787

Reclassification to common stock and additional paid in capital in connection with conversions of 1.25% convertible senior notes due 2020

$

$

6,992

Unpaid purchases of property and equipment

$

23,892

$

12,836

Leased assets obtained in exchange for new operating lease liabilities

$