0001558370-21-014131 | 10-Q | XBRL Viewer

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2021	Oct. 26, 2021
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2021
Entity File Number	001-12400
Entity Registrant Name	INCYTE CORP
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-3136539
Entity Address, Address Line One	1801 Augustine Cut-Off
Entity Address, City or Town	Wilmington
Entity Address, State or Province	DE
Entity Address, Postal Zip Code	19803
City Area Code	302
Local Phone Number	498-6700
Title of 12(b) Security	Common Stock, $.001 par value per share
Trading Symbol	INCY
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		220,890,618
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Entity Central Index Key	0000879169
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
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
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

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Marketable securities-amortized cost	$ 285,135	$ 288,199
Marketable securities-allowance for credit losses	$ 0	$ 0
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	220,885,119	219,489,329
Common stock, shares outstanding	220,885,119	219,489,329

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenues:
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
Product revenues, net
Revenues:
Total revenues	$ 594,013	$ 522,252	$ 1,673,974	$ 1,509,269
Product royalty revenues
Revenues:
Total revenues	183,974	$ 98,391	404,440	272,924
Milestone revenues
Revenues:
Total revenues	$ 35,000		$ 45,000	$ 95,000

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Balances at Dec. 31, 2019	$ 216	$ 4,044,490	$ (15,542)	$ (1,430,758)	$ 2,598,406
Increase (Decrease) in Stockholders' Equity
Issuance of 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	14,618			14,619
Issuance of shares of Common Stock for services rendered		145			145
Stock compensation		42,758			42,758
Other comprehensive income (loss)			2,435		2,435
Net income (loss)				(720,642)	(720,642)
Balances at Mar. 31, 2020	217	4,102,011	(13,107)	(2,151,400)	1,937,721
Balances at Dec. 31, 2019	216	4,044,490	(15,542)	(1,430,758)	2,598,406
Increase (Decrease) in Stockholders' Equity
Other comprehensive income (loss)					5,794
Net income (loss)					(445,547)
Balances at Sep. 30, 2020	219	4,276,667	(9,748)	(1,876,305)	2,390,833
Balances at Mar. 31, 2020	217	4,102,011	(13,107)	(2,151,400)	1,937,721
Increase (Decrease) in Stockholders' Equity
Issuance of shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes and shares of Common Stock under the ESPP	1	69,193			69,194
Issuance of shares of Common Stock for services rendered		139			139
Issuance of shares of Common Stock upon conversion of Convertible Senior Notes		162			162
Stock compensation		46,406			46,406
Other comprehensive income (loss)			684		684
Net income (loss)				290,298	290,298
Balances at Jun. 30, 2020	218	4,217,911	(12,423)	(1,861,102)	2,344,604
Increase (Decrease) in Stockholders' Equity
Issuance of 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 shares of Common Stock for services rendered		131			131
Issuance of shares of Common Stock upon conversion of Convertible Senior Notes		6,873			6,873
Stock compensation		43,970			43,970
Other comprehensive income (loss)			2,675		2,675
Net income (loss)				(15,203)	(15,203)
Balances at Sep. 30, 2020	219	4,276,667	(9,748)	(1,876,305)	2,390,833
Balances at Dec. 31, 2020	219	4,352,864	(15,360)	(1,726,455)	2,611,268
Increase (Decrease) in Stockholders' Equity
Issuance of 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	20,027			20,028
Issuance of shares of Common Stock for services rendered		108			108
Stock compensation		47,903			47,903
Other comprehensive income (loss)			(4,998)		(4,998)
Net income (loss)				53,535	53,535
Balances at Mar. 31, 2021	220	4,420,902	(20,358)	(1,672,920)	2,727,844
Balances at Dec. 31, 2020	219	4,352,864	(15,360)	(1,726,455)	2,611,268
Increase (Decrease) in Stockholders' Equity
Other comprehensive income (loss)					(3,286)
Net income (loss)					384,730
Balances at Sep. 30, 2021	221	4,508,807	(18,646)	(1,341,725)	3,148,657
Balances at Mar. 31, 2021	220	4,420,902	(20,358)	(1,672,920)	2,727,844
Increase (Decrease) in Stockholders' Equity
Issuance of shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units, net of shares withheld for taxes and shares of Common Stock under the ESPP		11,016			11,016
Issuance of shares of Common Stock for services rendered		109			109
Stock compensation		45,351			45,351
Other comprehensive income (loss)			2,085		2,085
Net income (loss)				149,456	149,456
Balances at Jun. 30, 2021	220	4,477,378	(18,273)	(1,523,464)	2,935,861
Increase (Decrease) in Stockholders' Equity
Issuance of 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 shares of Common Stock for services rendered		108			108
Stock compensation		43,314			43,314
Other comprehensive income (loss)			(373)		(373)
Net income (loss)				181,739	181,739
Balances at Sep. 30, 2021	$ 221	$ 4,508,807	$ (18,646)	$ (1,341,725)	$ 3,148,657

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - shares	3 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020
Issuance of shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units and performance shares	459,084	390,001	389,512	698,032	936,688	772,538
Issuance of shares of Common Stock under the ESPP		153,082			175,615
Issuance of shares of Common Stock for services rendered	1,466	1,288	1,357	1,434	1,403	1,957
Convertible Senior Notes 1.25 Percent Due 2020
Issuance of shares of Common Stock upon conversion of convertible senior notes				134,413	3,187

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 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 conversion/exchange of debt instruments		6,992
Unpaid purchases of property and equipment	23,892	12,836
Leased assets obtained in exchange for new operating lease liabilities	9,068	13,020
Leased assets obtained in exchange for new finance lease liabilities	$ 455	$ 2,160

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)	Dec. 31, 2020
Convertible Senior Notes 1.25 Percent Due 2020
Interest rate of debt (as a percent)	1.25%

Organization and business

9 Months Ended

Sep. 30, 2021

Organization and business

Organization and business

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.

Summary of significant accounting policies

9 Months Ended

Sep. 30, 2021

Summary of significant accounting policies

Summary of significant accounting policies

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 September 30, 2021, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 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, 2020 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, 2020.

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.

Foreign Currency Translation. Operations in non-U.S. entities are recorded in the functional currency of each entity. For financial reporting purposes, the functional currency of an entity is determined by a review of the source of an entity's most predominant cash flows. The results of operations for any non-U.S. dollar functional currency entities are translated from functional currencies into U.S. dollars using the average currency rate during each month. Assets and liabilities are translated using currency rates at the end of the period. Adjustments resulting from translating the financial statements of our foreign entities that use their local currency as the functional currency into U.S. dollars are reflected as a component of other comprehensive income (loss). Transaction gains and losses are recorded in other income (expense), net, in the condensed consolidated statements of operations.

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.

Concentrations of Credit Risk. Cash, cash equivalents, marketable securities, and trade receivables are financial instruments which potentially subject us to concentrations of credit risk. The estimated fair value of financial instruments

approximates the carrying value based on available market information. By policy, we invest our excess available funds primarily in U.S. government debt securities which are securities issued or guaranteed by the U.S. government and money market funds that meet certain guidelines, which limits exposure to potential credit losses. Our receivables mainly relate to our product sales and collaborative agreements with pharmaceutical companies. We have not experienced any significant credit losses on cash, cash equivalents, marketable securities, or trade receivables to date and do not require collateral on receivables.

Current Expected Credit Losses. Financial assets measured at amortized cost are assessed for future expected credit losses under guidance within ASC 326, Financial Instruments – Credit Losses, to determine if application of an expected credit losses reserve is necessary. On a quarterly basis, receivables that resulted from revenue transactions within the scope of ASC 606, Revenue from Contracts with Customers, and recognized on an amortized cost basis are reviewed on a customer-level basis to analyze expectations of future collections based upon past history of collections, payment, aging of receivables and viability of the customer to continue payment, as well as estimates of future economic conditions. Receivables generally consist of two types: receivables from collaborative agreements, including milestones, reimbursements for agreed-upon activities and sales royalties; and receivables from customer product sales. Collaborative agreement receivables are closely monitored relationships with select, reputable industry peers. Collection of receivables is assessed within each collaborative partnership on a quarterly basis, including evaluation of each entity’s credit quality, financial health and past history of payment. Customer product sales receivables are independently evaluated on a monthly basis, on which unusual items or aged receivables are closely monitored for signs of credit deterioration, or indications of payment refusal. Customer product sales are with specialty pharmaceutical distributors, wholesalers, and certain public and private institutions, some of which whose financial obligations are funded by various government agencies.

Cash and Cash Equivalents. Cash and cash equivalents are held in banks or in custodial accounts with banks. Cash equivalents are defined as all liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash.

Marketable Securities—Available-for-Sale. Our marketable securities consist of investments in U.S. government debt securities that are classified as available-for-sale. Available-for-sale securities are carried at fair value, based on quoted market prices and observable inputs, with unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. We classify marketable securities that are available for use in current operations as current assets on the condensed consolidated balance sheets. Realized gains and losses and declines in value judged to be other than temporary for available-for-sale securities are included in other income (expense), net on the condensed consolidated statements of operations. The cost of securities sold is based on the specific identification method.

Accounts Receivable. As of September 30, 2021 and December 31, 2020, we had no allowance for doubtful accounts. We provide an allowance for doubtful accounts based on management’s assessment of the collectability of specific customer accounts, which includes consideration of the credit worthiness and financial condition of those customers, aging of such receivables, history of collectability with the customer and the general economic environment. We record an allowance to reduce the receivables to the amount that is expected to be collected.

Inventory. Inventories are determined at the lower of cost and net realizable value with cost determined under the specific identification method and may consist of raw materials, work in process and finished goods. We capitalize inventory after FDA approval as the related costs are expected to be recoverable through the commercialization of the product. Costs incurred prior to FDA approval are recorded as research and development expense in our statements of operations.

Raw materials and work-in-process inventory are not subject to expiration and the shelf life of finished goods inventory is approximately 36 months from the start of manufacturing of the finished goods. We evaluate for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. We classify inventory as current on the condensed consolidated balance sheets when we expect inventory to be consumed for commercial use within the next twelve months.

Variable Interest Entities. We perform an initial and ongoing evaluation of the entities with which we have variable interests, such as equity ownership, in order to identify entities (i) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support or (ii) in which the equity investors lack an essential characteristic of a controlling financial interest as variable interest entities (“VIE” or “VIEs”). If an entity is identified as a VIE, we perform an assessment to determine whether we have both (i) the power to direct activities that most significantly impact the VIE’s economic performance and (ii) have the obligation to absorb losses from or the right to receive benefits of the VIE that could potentially be significant to the VIE. If both of these criteria are satisfied, we are identified as the primary beneficiary of the VIE. As of September 30, 2021, there were no entities in which we held a variable interest which we determined to be VIEs.

Long Term Investments. Our long term investments consist of equity investments in common stock of publicly-held companies with whom we have entered into collaboration and license agreements. We classify all of our equity investments in common stock of publicly-held companies as long term investments on our condensed consolidated balance sheets. Our equity investments are accounted for at fair value using readily determinable pricing available on a securities exchange on our condensed consolidated balance sheets. All changes in fair value are reported in the condensed consolidated statements of operations as an unrealized gain (loss) on long term investments.

In assessing whether we exercise significant influence over any of the companies in which we hold equity investments, we consider the nature and magnitude of our investment, any voting and protective rights we hold, any participation in the governance of the other company, and other relevant factors such as the presence of a collaboration or other business relationship. Currently, none of our equity investments in publicly-held companies are considered relationships in which we are able to assert control.

Property and Equipment, net. Property and equipment, net is stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or lease term.

Lease Accounting. All leases with a lease term greater than 12 months, regardless of lease type classification, are recorded as an obligation on the balance sheet with a corresponding right-of-use asset. Both finance and operating leases are reflected as liabilities on the commencement date of the lease based on the present value of the lease payments to be made over the lease term. Current operating lease liabilities are reflected in accrued and other current liabilities and noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheet. Right-of-use assets are valued at the initial measurement of the lease liability, plus any initial direct costs or rent prepayments, minus lease incentives and any deferred lease payments. Operating lease right-of-use assets are recorded in property and equipment, net on the condensed consolidated balance sheet and lease cost is recognized on a straight-line basis. For finance leases, expense is recognized as separate amortization and interest expense, with higher interest expense in the earlier periods of a lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the term of the lease. In determining whether a contract contains a lease, asset and service agreements are assessed at onset and upon modification for criteria of specifically identified assets, control and economic benefit.

Other Intangible Assets, net. Other intangible assets, net consist of licensed intellectual property rights acquired in business combinations, which are reported at acquisition date fair value, less accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives using the straight-line method.

Impairment of Long-Lived Assets. Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset. If the expected cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted future cash flows.

Goodwill. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but is tested

for impairment at the reporting unit level at least annually as of October 1 or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts. A reporting unit is the same as, or one level below, an operating segment. Our operations are currently comprised of a single, entity wide reporting unit. We completed our most recent annual impairment assessment as of October 1, 2020 and determined that the carrying value of our goodwill was not impaired.

Income Taxes. We account for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts reportable for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The primary factors used to assess the likelihood of realization are our recent history of cumulative earnings or losses, expected reversals of taxable temporary timing differences, forecasts of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets. Upon evaluating and weighting both positive and negative evidence, we concluded that we should continue to maintain the valuation allowance on the majority of our deferred tax assets as of September 30, 2021.

We recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any interest and penalties on uncertain tax positions are included within the tax provision.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in March 2020 to provide an estimated $2.2 trillion designed to stimulate the U.S. economy during the COVID-19 pandemic. The Act includes tax relief, government loans, grants and investments for entities in affected industries, which has related accounting and financial reporting impacts. Disclosure for certain income tax accounting measures are required in the period of enactment and disclosure for government loans, investments, grants, and revenue recognition are required in future periods as federal agencies establish rules and procedures to implement the CARES Act. During 2020, we delayed the payment of certain employer payroll tax amounts to future periods as allowed under the Act. We do not expect the CARES Act to have a material impact on our overall financial results, our income tax provision or our liquidity. We have further described the impact and risks of the COVID-19 pandemic on our business in Item 1A. Risk Factors.

Net Income (Loss) Per Share. Our basic and diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during all periods presented. Options to purchase stock, restricted stock units and performance stock units are included in diluted earnings per share calculations, unless the effects are anti-dilutive.

Accumulated Other Comprehensive Income (Loss). Accumulated other comprehensive income (loss) consists of unrealized gains or losses on our marketable debt securities that are classified as available-for-sale, foreign currency translation gains or losses and defined benefit pension obligations.

Revenue Recognition. Revenue-generating contracts are assessed under ASC 606, Revenue from contracts with customers, to identify distinct performance obligations, determine the transaction price of the contract and allocate the transaction price to each of the distinct performance obligations. Revenue is recognized when we have satisfied a performance obligation through transferring control of the promised good or service to a customer. Control, in this instance, may mean the ability to prevent other entities from directing the use of, and receiving benefit from, a good or service. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation, which for the Company is generally at a point

in time. We also assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer.

Product Revenues

Our product revenues consist of sales of JAKAFI and PEMAZYRE in the U.S., sales of MINJUVI, PEMAZYRE and ICLUSIG in Europe, and sales of PEMAZYRE in Japan. Product revenues are recognized once we satisfy the performance obligation at a point in time under the revenue recognition criteria as described above. We sell JAKAFI and PEMAZYRE to our customers in the U.S., which include specialty pharmacies and wholesalers. We sell MINJUVI, PEMAZYRE and ICLUSIG to our customers in the European Union and certain other jurisdictions, which include retail pharmacies, hospital pharmacies and distributors. We sell PEMAZYRE in Japan to an exclusive wholesaler.

We recognize revenues for product received by our customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and government rebates, such as Medicare Part D coverage gap reimbursements in the U.S. Product shipping and handling costs are included in cost of product revenues.

Customer Credits: Our customers are offered various forms of consideration, including allowances, service fees and prompt payment discounts. We expect our customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. Service fees are also deducted from total product sales as they are earned.

Rebates and Discounts: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program in the U.S. and mandated discounts in Europe in markets where government-sponsored healthcare systems are the primary payers for healthcare. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers. The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launches. Our estimates for expected utilization of rebates are based on data received from our customers. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

Chargebacks: Chargebacks are discounts that occur when certain contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, purchase directly from our wholesalers. Contracted customers generally purchase the product at a discounted price. The wholesalers, in turn, charges back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers. In addition to actual chargebacks received we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. Additionally, beginning in January 2020, the amount of spending required by eligible patients in the Medicare Part D insurance coverage gap increased 30% due to the expiration of a provision in the Patient Protection and Affordable Care Act, which now results in a change in the True Out of Pocket (TrOOP) calculation methodology. The methodological change has resulted in an increase in required spending by patients and, in turn, an increase in manufacturers’ contributions on behalf of patients in the Medicare Part D insurance coverage gap.

Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators.

Product Royalty Revenues

Royalty revenues on commercial sales for ruxolitinib (marketed as JAKAVI® outside the United States) by Novartis Pharmaceutical International Ltd. (“Novartis”) are based on net sales of licensed products in licensed territories as provided by Novartis. Royalty revenues on commercial sales for baricitinib (marketed as OLUMIANT) by Eli Lilly and Company (“Lilly”) are based on net sales of licensed products in licensed territories as provided by Lilly. Royalty revenues on commercial sales for capmatinib (marketed as TABRECTA®) by Novartis are based on net sales of licensed products in the licensed territories as provided by Novartis. We recognize royalty revenues in the period the sales occur.

Milestone and Contract Revenues

For each collaborative research, development and/or commercialization agreement that results in revenue under the guidance of ASC 606 we identify all material performance obligations, which may include the license to intellectual property and know-how, research and development activities and/or other activities. In order to determine the transaction price, in addition to any upfront payment, we estimate the amount of variable consideration, including milestone payments, at the outset of the contract utilizing the most likely amount method. The most likely amount method is used since the milestone payments have a binary outcome (i.e., we receive all or none of the milestone payment). We constrain the estimate of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, management considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. Once the estimated transaction price is established, amounts are allocated to the performance obligations that have been identified. The transaction price is generally allocated to each separate performance obligation on a relative standalone selling price basis.

Out-licensing arrangements contain the right to use functional intellectual property, which is the underlying performance obligation of these collaborative arrangements. If the license of our intellectual property is determined to be distinct from other performance obligations in the arrangement, the functional intellectual property that is transferred to the collaborative partner at the onset of the arrangement is concluded to have significant standalone functionality and value at the point in time at which the intellectual property is made available to the collaborative partner. For licenses that are not distinct from other obligations identified in the arrangement, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, we apply an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. For the three and nine months ended September 30, 2021 and 2020, we had no revenues from intellectual property licenses recognized over time.

For milestone revenues related to sales-based achievements, we recognize the milestone revenues in the corresponding period of the product sale, in accordance with the guidance of ASC 606-10-55-65 for contracts that include a license to intellectual property and the license is the predominant item to which the product sale relates.

Subsequent to the transfer of the intellectual property, we may earn milestones through achievement of pre-specified developmental or regulatory events and, as such, milestones are accounted for as variable consideration. We include developmental or regulatory milestones in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the milestone is subsequently resolved. Under the agreements currently in place, we do not consider these events to be within our control, but rather dependent upon the development activities of our collaborative partners and the decisions made by regulatory agencies. Accordingly, these milestones are not included in the transaction price until the counterparty, or third-party in the event of a regulatory submission, confirms the satisfaction or completion of the milestone triggering

event. Given the high level of uncertainty of achievement, variable consideration associated with milestones are fully constrained until confirmation of the satisfaction or completion of the milestone by the third-party.

Generally, the milestone events contained in our collaboration agreements coincide with the progression of our drugs from development, to regulatory approval and then to commercialization. The value of these milestones is dictated within the contract and is fixed upon achievement and reflects the amount of consideration which we expect to be entitled to in exchange for the satisfaction of that milestone. The process of successfully discovering a new development candidate, having it approved and successfully commercialized is highly uncertain. As such, the milestone payments we may earn from our partners involve a significant degree of risk to achieve and therefore, subsequent milestone payments due to Incyte are recognized as revenue at the point in time when such milestones are achieved.

Our collaboration agreements may also include an option for the collaborative partner to elect to participate in research and development activities, such as shared participation in additional clinical trials using the compound. The presence of additional options for future participatory activities are assessed to determine if they represent material rights offered by us to the collaborative partner. We also determine whether the reimbursement of research and development expenses should be accounted for as collaborative revenues or an offset to research and development expenses in accordance with the provisions of gross or net revenue presentation and recognize the corresponding revenues or records the corresponding offset to research and development expenses as incurred.

Our collaborative agreements may also include provisions for additional future collaborative efforts, such as options for shared commercialization staffing or licensing of additional molecules, involvement in joint committees, or options for inclusion in negotiations of future supply rights, which at the time of each collaborative agreement’s inception, are assessed to determine if these meet the definition of a performance obligation under ASC 606.

Cost of Product Revenues

Cost of product revenues includes all product related costs. In addition, cost of product revenues include low single-digit royalties under our collaboration and license agreement to Novartis on all future sales of JAKAFI in the United States and the amortization of our licensed intellectual property for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years from the date of acquisition on June 1, 2016 of all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l. (since renamed Incyte Biosciences Luxembourg S.à.r.l.) from ARIAD Pharmaceuticals, Inc. (“ARIAD”). Cost of product revenues also includes employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial products.

Research and Development Costs. Our policy is to expense research and development costs as incurred, including amounts funded by research and development collaborations. Research and development expenses are comprised of costs we incur in performing research and development activities, including salary and benefits; stock-based compensation expense; outsourced services and other direct expenses, including clinical trial and pharmaceutical development costs; collaboration payments; expenses associated with drug supplies that are not being capitalized; and infrastructure costs, including facilities costs and depreciation expense. If a collaboration is a cost-sharing arrangement in which both we and our collaborator perform development work and share costs, we also recognize, as research and development expense in the period when our collaborator incurs development expenses, our portion of the co-development expenses that we are obligated to reimburse.

We often contract with contract research organizations (“CROs”) to facilitate, coordinate and perform agreed upon research and development of a new drug. To ensure that research and development costs are expensed as incurred, we record monthly accruals for clinical trials and preclinical testing costs based on the work performed under the contract. These CRO contracts typically call for the payment of fees for services at the initiation of the contract and/or upon the achievement of certain clinical trial milestones. In the event that we prepay CRO fees, we record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed. Most professional fees, including project and clinical management, data management, monitoring, and medical writing fees are incurred throughout the contract period. These professional fees are expensed based on their percentage of completion at a particular date. Our CRO contracts generally include pass through fees. Pass through fees include, but are not limited to, regulatory expenses, investigator fees, travel costs, and other

miscellaneous costs, including shipping and printing fees. We expense the costs of pass through fees under our CRO contracts as they are incurred, based on the best information available to us at the time. The estimates of the pass through fees incurred are based on the amount of work completed for the clinical trial and are monitored through correspondence with the CROs, internal reviews and a review of contractual terms. The factors utilized to derive the estimates include the number of patients enrolled, duration of the clinical trial, estimated patient attrition, screening rate and length of the dosing regimen. CRO fees incurred to set up the clinical trial are expensed during the setup period. Under our clinical trial collaboration agreements we may be reimbursed for certain development costs incurred. Such costs are recorded as a reduction of research and development expense in the period in which the related expense is incurred.

Stock Compensation. Share-based payment transactions with employees, which include stock options, restricted stock units (“RSUs”) and performance shares (“PSUs”), are recognized as compensation expense over the requisite service period based on their estimated fair values as well as expected forfeiture rates. The stock compensation process requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility over the option term and expected option lives, as well as expected forfeiture rates and the probability of PSUs vesting. The fair value of stock options, which are subject to graded vesting, are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of RSUs that are subject to cliff vesting are recognized as compensation expense over the requisite service period using the straight-line attribution method, and the fair value of RSUs that are subject to graded vesting are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of PSUs are recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, which we assess as of the end of each reporting period. Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting.

Advertising Expenses. Advertising expenses, comprised primarily of television, radio, print media and Internet advertising, are expensed as incurred and are included in selling, general, and administrative expenses. For the three and nine months ended September 30, 2021, advertising expenses were approximately $13.7 million and $32.0 million, respectively. For the three and nine months ended September 30, 2020, advertising expenses were approximately $6.4 million and $16.5 million, respectively.

Long Term Incentive Plans. We have long term incentive plans which provide eligible employees with the opportunity to receive performance and service-based incentive compensation, which may be comprised of cash, stock options, restricted stock units and/or performance shares. The payment of cash and the grant or vesting of equity may be contingent upon the achievement of pre-determined regulatory, sales and internal performance milestones.

Acquisition-Related Contingent Consideration. Acquisition-related contingent consideration consists of our future royalty obligations on future net sales of ICLUSIG to Takeda Pharmaceutical Company Limited, which acquired ARIAD (“Takeda”). Acquisition-related contingent consideration was recorded on the acquisition date of June 1, 2016 at the estimated fair value of the obligation, in accordance with the acquisition method of accounting. The fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. The fair value of the acquisition-related contingent consideration is remeasured each reporting period, with changes in fair value recorded in the condensed consolidated statements of operations.

Collaboration loss sharing. Under collaboration and license agreements with shared commercialization efforts, we record our share of the losses from the co-commercialization efforts in collaboration loss sharing on the condensed consolidated statement of operations. For the three and nine months ended September 30, 2021 and 2020, collaboration

loss sharing represents our 50% share of the United States loss for commercialization of MONJUVI (tafasitamab-cxix) under our agreement with MorphoSys.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance applies to all entities and aims to reduce the complexity of tax accounting standards while enhancing reporting disclosures. This guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein. We adopted this guidance for the period beginning January 1, 2021. Upon adoption, ASU No. 2019-12 had an immaterial impact on the condensed consolidated financial statements.

Revenues

9 Months Ended

Sep. 30, 2021

Revenues

Revenues

3. Revenues

As discussed in Note 2, revenues are recognized under guidance within ASC 606. The following table presents our disaggregated revenue for the periods presented (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
JAKAFI revenues, net	$	547,373	$	487,783	$	1,542,138	$	1,420,968
ICLUSIG revenues, net		28,522		26,380		82,356		76,426
PEMAZYRE revenues, net		17,562		8,089		48,924		11,875
MINJUVI revenues, net		556		—		556		—
Total product revenues, net		594,013		522,252		1,673,974		1,509,269
JAKAVI product royalty revenues		94,655		68,306		242,295		190,856
OLUMIANT product royalty revenues		86,572		28,647		154,875		79,924
TABRECTA product royalty revenues		2,747		1,438		7,270		2,144
Total 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

For further information on our revenue-generating contracts, refer to Note 9.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2021

Fair Value of Financial Instruments

Fair Value of Financial Instruments

4. Fair value of financial instruments

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.

At September 30, 2021 and December 31, 2020, 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 nine months ended September 30, 2021.

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)		September 30, 2021
Cash and cash equivalents	$	1,999,021	$	—	$	—	$	1,999,021
Debt securities (government)		—		285,054		—		285,054
Long term investments (Note 9)		192,096		—		—		192,096
Total assets	$	2,191,117	$	285,054	$	—	$	2,476,171


	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)		December 31, 2020
Cash and cash equivalents	$	1,513,008	$	—	$	—	$	1,513,008
Debt securities (government)		—		288,369		—		288,369
Long term investments (Note 9)		222,301		—		—		222,301
Total assets	$	1,735,309	$	288,369	$	—	$	2,023,678

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		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		September 30, 2021
Acquisition-related contingent consideration	$	—	$	—	$	252,000	$	252,000
Total liabilities	$	—	$	—	$	252,000	$	252,000


	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2020
Acquisition-related contingent consideration	$	—	$	—	$	266,000	$	266,000
Total liabilities	$	—	$	—	$	266,000	$	266,000

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


	2021
Balance at January 1,	$	266,000
Contingent consideration earned during the period but not yet paid		(9,910)
Payments made during the period		(17,158)
Change in fair value of contingent consideration		13,068
Balance at September 30,	$	252,000

The fair value of the contingent consideration was determined on the date of acquisition, June 1, 2016, using an income approach based on estimated ICLUSIG revenues 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 September 30, 2021 included a weighted average cost of capital of 10% and updated projections of future ICLUSIG revenues 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 nine months ended September 30, 2021 was due primarily to the passage of time and the impact of updated projections of future ICLUSIG revenues in the European Union.

We make payments to Takeda quarterly based on the royalties or any additional milestone payments earned in the previous quarter. At September 30, 2021 and December 31, 2020, contingent consideration earned but not yet paid was $9.9 million and $9.6 million, respectively, and was included in accrued and other current liabilities.

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


			Net		Net
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
September 30, 2021
Debt securities (government)	$	285,135	$	—	$	(81)	$	285,054

December 31, 2020
Debt securities (government)	$	288,199	$	170	$	—	$	288,369

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 per our accounting policy as described in Note 2. As of September 30, 2021 and December 31, 2020, the available-for-sale debt securities were held in US-government backed funds and Treasury assets and were assessed on an individual security basis to have a de minimis risk of credit loss.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Concentrations of Credit Risk and Current Expected Credit Losses

9 Months Ended

Sep. 30, 2021

Concentrations of Credit Risk and Current Expected Credit Losses

Concentrations of Credit Risk and Current Expected Credit Losses

5. Concentration of credit risk and current expected credit losses

In November 2009, we entered into a collaboration and license agreement with Novartis. In December 2009, we entered into a license, development and commercialization agreement with Lilly. In December 2018, we entered into a research collaboration and licensing agreement with Innovent Biologics, Inc. (“Innovent”). In July 2019, we entered into a collaboration and license agreement with Zai Lab (Shanghai) Co., Ltd., a subsidiary of Zai Lab Limited (collectively, “Zai Lab”). The above collaboration partners comprised, in aggregate, 37% and 42% of the accounts receivable balance as of September 30, 2021 and December 31, 2020, respectively. For further information relating to these collaboration and license agreements, refer to Note 9.

In November 2011, we began commercialization and distribution of JAKAFI, and in April 2020, we began commercialization and distribution of PEMAZYRE to a number of customers. Our product revenues are concentrated in a

number of these customers. The concentration of credit risk related to our JAKAFI and PEMAZYRE product revenues is as follows:


	Percentage of Total Net				Percentage of Total Net
	Product Revenues for the				Product Revenues for the
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Customer A	19	%	20	%	19	%	20	%
Customer B	11	%	13	%	12	%	13	%
Customer C	17	%	17	%	18	%	17	%
Customer D	9	%	10	%	10	%	11	%
Customer E	11	%	8	%	11	%	8	%

We are exposed to risks associated with extending credit to customers related to the sale of products. Customers A, B, C, D and E comprised, in aggregate, 32% and 33% of the accounts receivable balance as of September 30, 2021 and December 31, 2020, respectively. The concentration of credit risk relating to ICLUSIG and MINJUVI product revenues or accounts receivable is not significant.

We assessed our collaborative and customer receivable assets as of September 30, 2021 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.

Inventory

9 Months Ended

Sep. 30, 2021

Inventory

Inventory

6. Inventory

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


	September 30,		December 31,
	2021		2020
Raw materials	$	1,275	$	1,275
Work-in-process		35,988		21,242
Finished goods		14,925		13,456
		52,188		35,973
Inventories-current		21,303		16,425
Inventories-noncurrent	$	30,885	$	19,548

Inventories, stated at the lower of cost and net realizable value, consist of raw materials, work in process and finished goods. At September 30, 2021, $21.3 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 September 30, 2021, $30.9 million of inventory was classified as noncurrent on the condensed consolidated balance sheets 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 FDA approval as the related costs are expected to be recoverable through the commercialization of the product. Costs incurred prior to FDA approval are recorded as research and development expense in our statements of operations. At September 30, 2021, inventory with approximately $72.1 million of product costs incurred prior to FDA approval had not yet been sold. We expect to sell the pre commercialization inventory over the next 3 to 36 months and as a result, cost of product revenues for will reflect a lower average per unit cost of materials.

Property and Equipment, net

9 Months Ended

Sep. 30, 2021

Property and Equipment, net

Property and Equipment, net

7. Property and equipment, net

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


	September 30,		December 31,
	2021		2020
Office equipment	$	18,395	$	17,880
Manufacturing and laboratory equipment		103,502		86,021
Computer equipment		75,105		66,640
Land		10,379		10,671
Building and leasehold improvements		277,901		238,042
Operating lease right-of-use assets		25,544		26,816
Construction in progress		343,686		257,929
		854,512		703,999
Less accumulated depreciation and amortization		(167,794)		(144,374)
Property and equipment, net	$	686,718	$	559,625

In March 2017, we acquired additional adjacent buildings to our global headquarters in Wilmington, Delaware and in 2019, began demolition of these buildings and construction of a new laboratory and office building totaling approximately 200,000 square feet. As of September 30, 2021, we have capitalized approximately $140.7 million in on site preparation, design and construction costs and currently expect the building to be completed in the first half of 2022.

In February 2018, we signed an agreement to rent a building in Morges, Switzerland for an initial term of 15 years plus one year of free rent, with multiple options to extend for an additional 20 years. The building serves as our European headquarters and consists of approximately 100,000 square feet of office space. This building allowed for consolidation of our European operations that were located in Geneva and Lausanne, Switzerland. In June 2019, we obtained control of the Morges building to begin our construction activity, which was completed in 2020. At that time, we determined the lease to be a finance lease and recorded a lease liability of $31.1 million and a finance lease right-of-use asset of $29.1 million, net of a lease incentive from our landlord of $2.0 million. We have capitalized approximately $19.1 million in leasehold improvements as of September 30, 2021 relating to Morges.

In July 2018, we signed an agreement to purchase land located in Yverdon, Switzerland. The land was purchased, in cash, for approximately $4.8 million. Upon this parcel, we are constructing a large molecule production facility. Construction activity commenced in July 2018 and as of September 30, 2021, we have capitalized approximately $186.7 million in construction in progress for costs for construction, ground preparation and architectural and engineering studies. We currently expect the facility will be operational in the first half of 2022.

We are the lessee of several contracts, including those to secure fleet vehicles, buildings and equipment. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. Some of our building leases include options to renew and the exercise of these options is at our discretion. Our current operating lease liabilities are reflected in accrued and other current liabilities and our noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheets and are as follows (in thousands):


	September 30,		December 31,
	2021		2020
Current
Operating lease liabilities	$	9,849	$	12,674
Finance lease liabilities		2,400		2,284
Noncurrent
Operating lease liabilities		14,951		14,188
Finance lease liabilities		31,376		32,573
Total lease liabilities	$	58,576	$	61,719

The cash paid for amounts included in the measurement of our operating lease liabilities for the nine months ended September 30, 2021 and 2020 was $11.4 million and $8.7 million, respectively, in operating cash flows. The cash paid for amounts included in the measurement of our finance lease liabilities for the nine months ended September 30, 2021 and 2020 was $1.8 million and $0.6 million, respectively, in financing cash flows.

As of September 30, 2021, our finance and operating leases had a weighted average lease term of approximately 13.6 and 4.7 years, respectively. The discount rate of our leases is an approximation of an estimated incremental borrowing rate and is dependent upon the term and economics of each agreement. The weighted average discount rate of our finance and operating leases is approximately 4.1% and 8.8%, respectively.

For the three and nine months ended September 30, 2021, we incurred approximately $3.5 million and $10.7 million, respectively, of expense related to our operating leases, approximately $0.7 million and $2.0 million, respectively, of amortization on our finance lease right-of-use assets and approximately $0.4 million and $1.0 million, respectively, of interest expense on our finance lease liabilities. For the three and nine months ended September 30, 2020, we incurred approximately $2.9 million and $9.0 million, respectively, of expense related to our operating leases, approximately $0.7 million and $1.9 million, respectively, of amortization on our finance lease right-of-use assets and approximately $0.3 million and $0.9 million, respectively, of interest expense on our finance lease liabilities. For the three and nine months ended September 30, 2021 and 2020, the cost of our short term leases with a term less than 12 months was de minimis.

Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2021

Intangible Assets and Goodwill

Intangible Assets and Goodwill

8. Intangible assets and goodwill

Intangible Assets, Net

The components of intangible assets were as follows (in thousands, except for useful life):

Balance at September 30, 2021

Balance at December 31, 2020

Weighted-

Gross

Net

Gross

Net

Average Useful

Carrying

Accumulated

Carrying

Accumulated

Carrying

Lives (Years)

Amount

Amortization

Amount

Amortization

Amount

Finite-lived intangible assets:

Licensed IP

12.5

271,000

114,861

156,139

271,000

98,709

172,291

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets is as follows (in thousands):


		Remainder of
		2021		2022		2023		2024		2025		Thereafter
Amortization expense	$	5,385	$	21,536	$	21,536	$	21,536	$	21,536	$	64,610

Goodwill

There were no changes to the carrying amount of goodwill for the nine months ended September 30, 2021.

License agreements

9 Months Ended

Sep. 30, 2021

License Agreements

License agreements

9. 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 received an upfront payment and immediate milestone payment totaling $210.0 million and were initially eligible to receive up to $1.2 billion in milestone payments across multiple indications upon the achievement of pre-specified events, including 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 April 2016, we amended this agreement to provide that Novartis has exclusive research, development and commercialization rights outside of the United States to ruxolitinib (excluding topical formulations) in the graft-versus-host-disease (“GVHD”) field. We became eligible to receive up to $75.0 million of additional potential development and regulatory milestones relating to GVHD.

Exclusive of the upfront payment of $150.0 million received in 2009 and the immediate milestone of $60.0 million earned in 2010, we have recognized and received, in the aggregate, $157.0 million for the achievement of development milestones, $280.0 million for the achievement of regulatory milestones and $200.0 million for the achievement of sales milestones through September 30, 2021.

We recognize development and regulatory milestones upon confirmation of achievement of the event, as development and regulatory approvals are events not controllable by us but rather development activities of Novartis and decisions made by regulatory agencies. We recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Novartis.

In May 2020, we recognized a $25.0 million development milestone and a $45.0 million regulatory milestone for the FDA approval of capmatinib as TABRECTA for the treatment of adult patients with metastatic non-small cell lung cancer (NSCLC) whose tumors have a mutation that leads to MET exon 14 skipping (METex14) as detected by an FDA-approved test. In June 2020, we recognized a $20.0 million regulatory milestone for the Japanese Ministry of Health, Labour and Welfare approval of TABRECTA for METex14 mutation-positive advanced and/or recurrent unresectable non-small cell lung cancer.

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%. Since the achievement of the $60.0 million regulatory milestone related to reimbursement of JAKAVI in Europe in September 2014, we are obligated to pay to Novartis tiered royalties in the low single-digits on future JAKAFI net sales within the United States. During the three and nine months ended September 30, 2021, such royalties payable to Novartis on net sales within the United States totaled $26.9 million and $70.6 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations. During the three and nine months ended September 30, 2020, such royalties payable to Novartis on net sales within the United States totaled $23.9 million and $64.6 million, respectively, and were reflected in cost of product revenues on the condensed consolidated statements of operations. At September 30, 2021 and December 31, 2020, $132.4 million and $96.4 million, respectively, of accrued royalties payable to Novartis were included in accrued and other current liabilities on the condensed consolidated balance

sheets. 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.

The Novartis agreement will continue on a program-by-program basis until Novartis has no royalty payment obligations with respect to such program or, if earlier, the termination of the agreement or any program in accordance with the terms of the agreement. Royalties are payable by Novartis on a product-by-product and country-by-country basis until the latest to occur of (i) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country, (ii) the expiration of regulatory exclusivity for the licensed product in such country and (iii) a specified period from first commercial sale in such country of the licensed product by Novartis or its affiliates or sublicensees. The agreement may be terminated in its entirety or on a program-by-program basis by Novartis for convenience. The agreement may also be terminated by either party under certain other circumstances, including material breach.

Reimbursable costs incurred after the effective date of the agreement with Novartis are recorded net against the related research and development expenses. Research and development expenses for the three and nine months ended September 30, 2021 were net of $0.0 million and $0.1 million, respectively, of costs reimbursed by Novartis. Research and development expenses for the three and nine months ended September 30, 2020 were net of $0.0 million and $0.3 million, respectively, of costs reimbursed by Novartis. At September 30, 2021 and December 31, 2020, $0.2 million and $0.2 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

Milestone and contract revenue under the Novartis agreement for the three and nine months ended September 30, 2020 was $0.0 million and $90.0 million, respectively. Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and nine months ended September 30, 2021 was $94.7 million and $242.3 million, respectively. Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and nine months ended September 30, 2020 was $68.3 million and $190.9 million, respectively. Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and nine months ended September 30, 2021 was $2.7 million and $7.3 million, respectively. Product royalty revenue related to Novartis net sales of TABRECTA worldwide for the three and nine months ended September 30, 2020 was $1.4 million and $2.1 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. We received an upfront payment of $90.0 million, and were initially eligible to receive up to $665.0 million in substantive milestone payments across multiple indications upon the achievement of pre-specified events, including 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. Exclusive of the upfront payment of $90.0 million received in 2009, we have recognized and received, in aggregate, $149.0 million for the achievement of development milestones and $265.0 million for the achievement of regulatory milestones through September 30, 2021.

We recognize development and regulatory milestones upon confirmation of achievement of the event, as development and regulatory approvals are events not controllable by us but rather development activities of Lilly and decisions made by regulatory agencies. We recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Lilly.

In January 2016, Lilly submitted an NDA to the FDA and a Marketing Authorization Application (MAA) to the European Medicines Agency for baricitinib as treatment for rheumatoid arthritis. In February 2017, we and Lilly announced that the European Commission approved baricitinib as OLUMIANT for the treatment of moderate-to-severe rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to, one or more disease-modifying antirheumatic drugs. In July 2017, Japan's Ministry of Health, Labor and Welfare granted marketing approval for OLUMIANTfor the treatment of rheumatoid arthritis in patients with inadequate response to standard-of-care therapies.

In June 2018, the FDA approved the 2mg dose of OLUMIANT for the treatment of adults with moderately-to-severely active rheumatoid arthritis who have had an inadequate response to one or more tumor necrosis factor inhibitor therapies. In October 2020, Lilly announced that the European Commission approved baricitinib as OLUMIANT for the treatment of moderate-to-severe atopic dermatitis in adult patients who are candidates for systemic therapy.

We retained options to co-develop our JAK1/JAK2 inhibitors with Lilly on a compound-by-compound and indication-by-indication basis. Lilly is responsible for all costs relating to the development and commercialization of the compounds unless we elect to co-develop any compounds or indications. If we elect to co-develop any compounds and/or indications, we would be responsible for funding 30% of the associated future global development costs from the initiation of a Phase IIb trial through regulatory approval, including post-launch studies required by a regulatory authority. We would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging up to the high twenties on potential future global net sales for compounds and/or indications that we elect to co-develop. For indications that we elect not to co-develop, we would receive tiered, double-digit royalty payments on future global net sales with rates ranging up to 20% if the product is successfully commercialized. If we have started co-development funding for any indication, we can at any time opt out and stop future co-development cost sharing. If we elect to do this we would still be eligible for our base royalties plus an incremental pro-rated royalty commensurate with our contribution to the total co-development cost for those indications for which we co-funded. We previously had retained an option to co-promote products in the United States but, in March 2016, we waived our co-promotion option as part of an amendment to the agreement.

In July 2010, we elected to co-develop baricitinib with Lilly in rheumatoid arthritis and became responsible for funding 30% of the associated future global development costs for this indication from the initiation of the Phase IIb trial through regulatory approval, including post-launch studies required by a regulatory authority. We subsequently elected to co-develop baricitinib with Lilly in psoriatic arthritis, atopic dermatitis, alopecia areata, systemic lupus erythematosus and axial spondyloarthritis and were responsible for funding 30% of future global development costs for those indications through regulatory approval, including post-launch studies required by a regulatory authority. In April 2019, we elected to end additional co-funding of the development of baricitinib effective as of January 1, 2019. We will continue to receive royalties on global net sales of OLUMIANT, pursuant to the terms in the Lilly agreement, as described above.

In May 2020, we amended our agreement with Lilly to enable Lilly to develop and commercialize baricitinib for the treatment of COVID-19. As part of the amended agreement, in addition to the royalties described above, we will be entitled to receive additional royalty payments with rates in the low teens on global net sales of baricitinib for the treatment of COVID-19 that exceed a specified aggregate global net sales threshold.

The Lilly agreement will continue until Lilly no longer has any royalty payment obligations or, if earlier, the termination of the agreement in accordance with its terms. Royalties are payable by Lilly on a product-by-product and country-by-country basis until the latest to occur of (i) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country, (ii) the expiration of regulatory exclusivity for the licensed product in such country and (iii) a specified period from first commercial sale in such country of the licensed product by Lilly or its affiliates or sublicensees. The agreement may be terminated by Lilly for convenience, and may also be terminated under certain other circumstances, including material breach.

Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and nine months ended September 30, 2021 was $86.6 million and $154.9 million, respectively. Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and nine months ended September 30, 2020 was $28.6 million and $79.9 million, respectively.

Lilly - Ruxolitinib

In March 2016, we entered into an amendment to the agreement with Lilly that amended the non-compete provision of the agreement to allow us to engage in the development and commercialization of ruxolitinib in the GVHD field. Upon execution of the amendment, we paid Lilly an upfront payment of $35.0 million and Lilly is eligible to receive up to $40.0 million in regulatory milestone payments relating to ruxolitinib in the GVHD field. In May 2019, the approval of JAKAFI in steroid-refractory acute GVHD triggered a $20.0 million milestone payment to Lilly.

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, the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using Agenus’ antibody discovery platforms. The agreement became effective on February 18, 2015, upon the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Upon closing of the agreement, we paid Agenus total consideration of $60.0 million.

In February 2017, we and Agenus amended this agreement (the “Amended Agreement”). Under the terms of the Amended Agreement, we received exclusive worldwide development and commercialization rights to four checkpoint modulators directed against GITR, OX40, LAG-3 and TIM-3. In addition to the initial four program targets, we and Agenus have the option to jointly nominate and pursue additional targets within the framework of the collaboration, and in November 2015, three more targets were added. Targets may be designated profit-share programs, where all costs and profits are shared equally by us and Agenus, or royalty-bearing programs, where we are responsible for all costs associated with discovery, preclinical, clinical development and commercialization activities. The programs relating to GITR and OX40 and two of the undisclosed targets were profit-share programs until February 2017, while the other targets currently under collaboration are royalty-bearing programs. The Amended Agreement converted the programs relating to GITR and OX40 to royalty-bearing programs and removed from the collaboration the profit-share programs relating to the two undisclosed targets, with one reverting to us and one reverting to Agenus. Should any of those removed programs be successfully developed by a party, the other party will be eligible to receive the same milestone payments as the royalty-bearing programs and royalties at a 15% rate on global net sales. There are currently no profit-share programs. For each royalty-bearing product other than GITR and OX40, Agenus will be eligible to receive tiered royalties on global net sales ranging from 6% to 12%. For GITR and OX40, Agenus will be eligible to receive 15% royalties on global net sales.

In 2017 under the Amended Agreement, we paid Agenus $20.0 million in accelerated milestones relating to the clinical development of the GITR and OX40 programs. As of March 31, 2021, we have paid Agenus additional milestones totaling $10.0 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. The agreement may be terminated by us for convenience upon 12 months’ notice and may also be terminated under certain other circumstances, including material breach.

In connection with the Amended Agreement, we also agreed to purchase 10.0 million shares of Agenus Inc. common stock for an aggregate purchase price of $60.0 million in cash, or $6.00 per share. We completed the purchase of the shares on February 14, 2017, when the closing price on The Nasdaq Stock Market for Agenus Inc. shares was $4.40 per share. The shares we acquired were not registered under the Securities Act of 1933 on the purchase date and were subject to certain security specific restrictions for a period of time, and accordingly, we estimated a discount for lack of marketability on the shares on the issuance date of $4.5 million, which resulted in a net fair value of the shares on the issuance date of $39.5 million. Therefore, of the total consideration paid of $60.0 million, $39.5 million was allocated to our stock purchase in Agenus Inc. and was recorded within long term investments and $20.5 million was allocated to research and development expense.

We concluded Agenus Inc. is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest. After completion of our stock purchases from Agenus Inc., we held an approximate ownership interest of 18% and, under circumstances present at that time, concluded that we had the ability to exercise significant influence, but not control, over Agenus Inc., primarily due to the level of intra-entity transactions between us and Agenus related to development expenses, as well as other qualitative factors. In the second quarter of 2020, we sold an aggregate of approximately 1.2 million shares of Agenus Inc. common stock. The sales transactions were priced at market, with per share pricing ranging from $3.57 to $4.21, resulting in gross proceeds of approximately $4.5 million. In the third quarter of 2020, we sold an aggregate of approximately 2.5 million shares of Agenus Inc. common stock. The sales transactions were priced at market, with per share pricing ranging from $4.28 to $5.25, resulting in gross proceeds of approximately $12.7 million. In the first quarter of 2021, we sold approximately 0.2 million shares of Agenus Inc. common stock priced at market at $5.45, resulting in gross proceeds of approximately $1.1 million. In the second quarter of 2021, we sold approximately 1.6 million shares of

Agenus Inc. common stock priced at market, with per share pricing ranging from $4.59 to $5.41, resulting in gross proceeds of approximately $8.2 million. In the third quarter of 2021, we sold approximately 0.2 million shares of Agenus Inc. common stock priced at market, with per share pricing ranging from $5.74 to $6.75, resulting in gross proceeds of approximately $1.1 million. As of September 30, 2021, we owned approximately 5% of the outstanding shares of Agenus Inc. common stock. As a result of having a less than 10% ownership interest and the recent diversification of Agenus Inc.’s development pipeline with other collaboration partners, we concluded that we no longer have significant influence over Agenus Inc. As such, we no longer account for our equity investment in Agenus Inc. as an equity method investment previously accounted for under the fair value option. We account for our investment in Agenus Inc. at fair value, whereby the investment is marked to market through earnings in each reporting period. For the three and nine months ended September 30, 2021, we recorded an unrealized loss of $2.8 million and an unrealized gain of $29.1 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during these periods. For the three and nine months ended September 30, 2020, we recorded an unrealized gain of $3.9 million and $1.2 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during these periods. The fair market value of our long term investment in Agenus Inc. at September 30, 2021 and December 31, 2020 was $63.4 million and $44.7 million, respectively.

Research and development expenses for the three and nine months ended September 30, 2021 also included $0.2 million and $0.9 million, respectively, of development costs incurred pursuant to the Agenus arrangement. Research and development expenses for the three and nine months ended September 30, 2020 also included $0.1 million and $0.4 million, respectively, of development costs incurred pursuant to the Agenus arrangement. At September 30, 2021 and December 31, 2020, a total of $0.8 million and $0.5 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Merus

In December 2016, we entered into a Collaboration and License Agreement with Merus N.V. (“Merus”). Under this agreement, which became effective in January 2017, 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 eleven independent programs.

The most advanced collaboration program is MCLA-145, a bispecific antibody targeting PD-L1 and CD137, for which we received exclusive development and commercialization rights outside of the United States. Merus retained exclusive development and commercialization rights in the United States to MCLA-145. Each party will share equally the costs of mutually agreed global development activities for MCLA-145, and fund itself any independent development activities in its territory. Merus will be responsible for commercializing MCLA-145 in the United States and we will be responsible for commercializing it outside of the United States.

In addition to receiving rights to MCLA-145 outside of the United States, we received worldwide exclusive development and commercialization rights to up to ten additional programs. Of these ten additional programs, Merus retained the option, subject to certain conditions, to co-fund development of up to two such programs. If Merus exercises its co-funding option for a program, Merus would be responsible for funding 35% of the associated future global development costs and, for certain of such programs, would be responsible for reimbursing us for certain development costs incurred prior to the option exercise. Merus will also have the right to participate in a specified proportion of detailing activities in the United States for one of those co-developed programs. All costs related to the co-funded collaboration programs are subject to joint research and development plans and overseen by a joint development committee, but we will have final determination as to such plans in cases of dispute. We will be responsible for all research, development and commercialization costs relating to all other programs.

In 2017, we paid Merus an upfront non-refundable payment of $120.0 million. For each program as to which Merus does not have commercialization or development co-funding rights, Merus will be eligible to receive up to $100.0 million in future contingent development and regulatory milestones, and up to $250.0 million in commercialization milestones as well as tiered royalties ranging from 6% to 10% of global net sales. For each program as to which Merus exercises its option to co-fund development, Merus will be eligible to receive a 50% share of profits (or sustain 50% of any losses) in the United States and be eligible to receive tiered royalties ranging from 6% to 10% of net sales of products outside of the United States. If Merus opts to cease co-funding a program as to which it exercised its co-development

option, then Merus will no longer receive a share of profits in the United States but will be eligible to receive the same milestones from the co-funding termination date and the same tiered royalties described above with respect to programs where Merus does not have a right to co-fund development and, depending on the stage at which Merus chose to cease co-funding development costs, Merus will be eligible to receive additional royalties ranging up to 4% of net sales in the United States. For MCLA-145, we and Merus will each be eligible to receive tiered royalties on net sales in the other party’s territory at rates ranging from 6% to 10%.

The Merus agreement will continue on a program-by-program basis until we have no royalty payment obligations with respect to such program or, if earlier, the termination of the agreement or any program in accordance with the terms of the agreement. The agreement may be terminated in its entirety or on a program-by-program basis by us for convenience. The agreement may also be terminated by either party under certain other circumstances, including material breach, as set forth in the agreement. If the agreement is terminated with respect to one or more programs, all rights in the terminated programs revert to Merus, subject to payment to us of a reverse royalty of up to 4% on sales of future products, if Merus elects to pursue development and commercialization of products arising from the terminated programs.

In addition, in December 2016, we entered into a Share Subscription Agreement with Merus, pursuant to which we agreed to purchase 3.2 million common shares of Merus for an aggregate purchase price of $80.0 million in cash, or $25.00 per share. We completed the purchase of the shares on January 23, 2017 when the closing price on The Nasdaq Stock Market for Merus shares was $24.50 per share. The shares we acquired were not registered under the Securities Act of 1933 on the purchase date and were subject to certain security specific restrictions for a period of time, and accordingly, we estimated a discount for lack of marketability on the shares on the issuance date of $5.6 million, which resulted in a net fair value of the shares on the issuance date of $72.8 million. Of the total consideration paid of $80.0 million, $72.8 million was allocated to our stock purchase in Merus and was recorded as a long term investment and $7.2 million was allocated to research and development expense. In January 2021, we purchased 350,000 common shares in Merus’ underwritten public offering of 4,848,485 common shares at the public offering price of $24.75 per share, or an aggregate purchase price of $8.7 million. The fair market value of our total long term investment in Merus at September 30, 2021 and December 31, 2020 was $78.1 million and $56.1 million, respectively.

We concluded Merus is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest. As of September 30, 2021, we owned approximately 9% of the outstanding common shares of Merus and conclude that we have the ability to exercise significant influence, but not control, over Merus based primarily on our ownership interest, the level of intra-entity transactions between us and Merus related to development expenses, as well as other qualitative factors. We have elected the fair value option to account for our long term investment in Merus whereby the investment is marked to market through earnings in each reporting period. We believe the fair value option to be the most appropriate accounting method to account for securities in publicly held collaborators for which we have significant influence. For the three and nine months ended September 30, 2021, we recorded an unrealized gain of $3.3 million and $13.3 million, respectively, based on the change in fair value of Merus’ common shares during these periods. For the three and nine months ended September 30, 2020, we recorded an unrealized loss of $13.1 million and $6.7 million, respectively, based on the change in fair value of Merus’ common shares during these periods.

Research and development expenses for the three and nine months ended September 30, 2021 included $3.1 million and $10.9 million, respectively, of additional development costs incurred pursuant to the Merus agreement. Research and development expenses for the three and nine months ended September 30, 2020 included $1.8 million and $6.0 million, respectively, of additional development costs incurred pursuant to the Merus agreement. At September 30, 2021 and December 31, 2020, a total of $1.6 million and $1.6 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Calithera

In January 2017, we entered into a Collaboration and License Agreement with Calithera Biosciences, Inc. (“Calithera”). Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase inhibitors, including INCB01158. We have agreed to co-fund 70% of the global development costs for the development of the licensed products for hematology and oncology indications. Calithera will have the right to conduct

certain clinical development under the collaboration, including combination studies of a licensed product with a proprietary compound of Calithera. We will be entitled to 60% of the profits and losses from net sales of licensed product in the United States, and Calithera will have the right to co-detail licensed products in the United States, and we have agreed to pay Calithera tiered royalties ranging from the low to mid-double digits on net sales of licensed products outside the United States.

As of September 30, 2021, we have paid Calithera an upfront license fee of $45.0 million and an additional $12.0 million milestone payment. In August 2020, Calithera delivered notice of its decision to opt out of its co-funding obligation, effective on September 30, 2020. As a result, the U.S. profit sharing will no longer be in effect, we will be responsible for funding all of the development costs of INCB01158 and any other licensed products, and the agreement provides that we will pay Calithera tiered royalties ranging from the low to mid-double digits on net sales of licensed products both in the United States and outside the United States and additional royalties to reimburse Calithera for previously incurred development costs. Calithera is eligible to receive $720.0 million in potential future development, regulatory and sales milestone payments and will have no further rights to research, develop or co-detail INCB001158. We will have the right to take over the conduct of all activities related to the research, development and commercialization of INCB001158 for all indications in the hematology/oncology field.

The Calithera agreement will continue on a product-by-product and country-by-country basis for so long as we are developing or commercializing products in the United States (if the parties are sharing profits in the United States) and until we have no further royalty payment obligations, unless earlier terminated according to the terms of the agreement. The agreement may be terminated in its entirety or on a product-by-product and/or a country-by-country basis by us for convenience. The agreement may also be terminated by us for Calithera’s uncured material breach, by Calithera for our uncured material breach and by either party for bankruptcy or patent challenge. If the agreement is terminated early with respect to one or more products or countries, all rights in the terminated products and countries revert to Calithera.

In addition, in January 2017, we entered into a Stock Purchase Agreement with Calithera for the purchase of 1.7 million shares of common stock of Calithera for an aggregate purchase price of $8.0 million in cash, or $4.65 per share. We completed the purchase of the shares on January 30, 2017 when the closing price on The Nasdaq Stock Market was $6.75 per share. The shares we acquired were registered under the Securities Act of 1933 on the purchase date and there were no security specific restrictions for these shares, and therefore the value of the 1.7 million shares acquired by us was $11.6 million. We paid total consideration of $53.0 million to Calithera, composed of the $45.0 million upfront license fee and the $8.0 million stock purchase price. Of the $53.0 million, $11.6 million was allocated to our stock purchase in Calithera and was recorded within long term investments and $41.4 million was allocated to research and development expense. The fair market value of our long term investment in Calithera at September 30, 2021 and December 31, 2020 was $3.8 million and $8.4 million, respectively.

We concluded Calithera is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest. As of September 30, 2021, we owned approximately 2% of the outstanding shares of Calithera common stock and there are several other stockholders who hold larger positions of Calithera. As we do not hold a significant position of the voting shares of Calithera and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment. We intend to hold the investment in Calithera for the foreseeable future and therefore, are accounting for our shares held in Calithera at fair value, and the investment is marked to market through earnings in each reporting period. Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying condensed consolidated balance sheets. For the three and nine months ended September 30, 2021 we recorded an unrealized gain of $0.2 million and an unrealized loss of $4.6 million, respectively, based on the change in fair value of Calithera’s common stock during these periods. For the three and nine months ended September 30, 2020 we recorded an unrealized loss of $3.2 million and $3.9 million, respectively, based on the change in fair value of Calithera’s common stock during these periods.

Research and development expenses for the three and nine months ended September 30, 2021 also included $0.3 million and $4.8 million, respectively, of additional development costs incurred pursuant to the Calithera agreement. Research and development expenses for the three and nine months ended September 30, 2020 also included $2.0 million

and $6.4 million, respectively, of additional development costs incurred pursuant to the Calithera agreement. At September 30, 2021 and December 31, 2020, a total of $0.0 million and $0.6 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

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 will 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.

As of September 30, 2021, we have paid MacroGenics an upfront payment of $150.0 million and developmental milestones totaling $70.0 million. MacroGenics is eligible to receive up to an additional $350.0 million in future contingent development and regulatory milestones, and up to $330.0 million in commercial milestones as well as tiered royalties ranging from 15% to 24% of global net sales.

The MacroGenics agreement will continue until we are no longer commercializing, developing or manufacturing INCMGA0012 or, if earlier, the termination of the agreement in accordance with its terms. The agreement may be terminated in its entirety or on a licensed product by licensed product basis by us for convenience. The agreement may also be terminated by either party under certain other circumstances, including material breach, as set forth in the agreement.

Research and development expenses for the three and nine months ended September 30, 2021 also included $17.8 million and $49.0 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement. Research and development expenses for the three and nine months ended September 30, 2020 also included $10.6 million and $43.3 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement. At September 30, 2021 and December 31, 2020, a total of $0.0 million and $0.1 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Syros

In January 2018, we entered into a Target Discovery, Research Collaboration and Option Agreement with Syros Pharmaceuticals, Inc. (“Syros”). Under this agreement, Syros will use its proprietary gene control platform to identify novel therapeutic targets with a focus in myeloproliferative neoplasms and we have received options to obtain exclusive worldwide rights to intellectual property resulting from the collaboration for up to seven validated targets. We will have exclusive worldwide rights to develop and commercialize any therapies under the collaboration that modulate those validated targets. We have agreed to pay Syros up to $54.0 million in target selection and option exercise fees should we decide to exercise all of our options under the agreement. For products resulting from the collaboration against each of the seven selected and validated targets, we have agreed to pay up to $50.0 million in potential development and regulatory milestones and up to $65.0 million in potential sales milestones. Syros is also eligible to receive low single-digit royalties on net sales of products resulting from the collaboration.

In addition, in January 2018, we entered into a Stock Purchase Agreement with Syros for the purchase of 0.8 million shares of common stock of Syros for an aggregate purchase price of $10.0 million in cash, or $12.61 per share. We agreed to not sell or otherwise transfer any of our Syros shares for a period, referred to as the Lock-Up Period, of 12 months after the closing date of the sale. We completed the purchase of the shares on January 8, 2018 when the closing price on The Nasdaq Stock Market was $9.77 per share. The shares we acquired were not registered on the purchase date, and accordingly, we estimated a discount for lack of marketability on the shares of $0.1 million, which resulted in a net fair value of the shares on the issuance date of $7.6 million. Of the $10.0 million aggregate purchase price paid, $7.6

million was allocated to our stock purchase in Syros and was recorded within long term investments and $2.4 million, representing premium paid on the purchase, was allocated to research and development expense. Also in January 2018, we entered into an Amended Stock Purchase Agreement with Syros for the purchase of an additional 0.1 million common shares of Syros for an aggregate purchase price of $1.4 million in cash, or $9.55 per share. The shares were acquired in February 2018 and the $1.4 million aggregate purchase price was recorded within long term investments on the condensed consolidated balance sheets. All acquired shares were subsequently registered under the Securities Act of 1933 in February 2018. The fair market value of our long term investment in Syros as of September 30, 2021 and December 31, 2020 was $4.2 million and $10.2 million, respectively.

We concluded Syros is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest. As of September 30, 2021, we owned approximately 2% of the outstanding shares of Syros common stock and there are several other stockholders who hold larger positions of Syros. As we do not hold a significant position of the voting shares of Syros and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment. We intend to hold the investment in Syros for the foreseeable future and therefore, are accounting for our shares held in Syros at fair value, and the investment is marked to market through earnings in each reporting period. Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying condensed consolidated balance sheets. For the three and nine months ended September 30, 2021, we recorded an unrealized loss of $0.9 million and $6.0 million, respectively, based on the change in fair value of Syros’ common stock during these periods. For the three and nine months ended September 30, 2020, we recorded an unrealized loss of $1.7 million and an unrealized gain of $1.8 million, respectively, based on the change in fair value of Syros’ common stock during these periods.

Innovent

In December 2018, we entered into a Research Collaboration and Licensing Agreement with Innovent. Under the terms of this agreement, Innovent received exclusive development and commercialization rights to our clinical-stage product candidates pemigatinib, itacitinib and parsaclisib in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. In January 2019, we recognized an upfront payment under this agreement of $40.0 million upon our transfer of the functional intellectual property related to the clinical-stage product candidates to Innovent, which was recorded in milestone and contract revenues on the condensed consolidated statement of operations. The upfront milestone was recognized as revenue at a point in time upon our transfer of the licenses to Innovent for the right to use the functional intellectual property. In addition, we are eligible to receive up to an additional $94.0 million in potential development and regulatory milestones.

In June 2021, we recognized a $10.0 million milestone for approval of PEMAZYRE in Taiwan, which was recorded in milestone and contract revenues. In April 2020, we recognized a $5.0 million milestone for the FDA approval of pemigatinib as PEMAZYRE, which was recorded in milestone and contract revenues.

In the event of commercialization of the licensed molecule, we are eligible to receive up to $202.5 million in potential sales milestones from Innovent. We will recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Innovent. We are also eligible to receive tiered royalties from the high-teens to the low-twenties on future sales of products resulting from the collaboration. We retain an option to assist in the promotion of the three product candidates in the Innovent territories.

Research and development expenses for the three and nine months ended September 30, 2021 were net of $0.0 million and $2.3 million of costs reimbursed by Innovent. Research and development expenses for the three and nine months ended September 30, 2020 were net of $1.7 million and $4.3 million, respectively, of costs reimbursed by Innovent. At September 30, 2021 and December 31, 2020, $2.4 million and $1.2 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

Zai Lab

In July 2019, we entered into a Collaboration and License Agreement with Zai Lab. Under the terms of this agreement, Zai Lab received development and exclusive commercialization rights to INCMGA0012 in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. In August 2019, we recognized an upfront payment under this agreement of $17.5 million.

The agreement allows for Zai Lab to continue development of the licensed molecule and to submit the licensed molecule to authorities for regulatory approval within the agreement territory, upon which we are eligible for up to $22.5 million in potential development and regulatory milestones. We recognize development and regulatory milestones upon confirmation of achievement of the event, as development and regulatory approvals are events not controllable by us but rather development activities of Zai Lab and decisions made by regulatory agencies.

In the event of commercialization of the licensed molecule, we are eligible to receive up to $37.5 million in potential sales milestones from Zai Lab. We will recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by Zai Lab. We are also eligible to receive tiered royalties from the low to mid-twenties on future product sales resulting from the collaboration. We also retain an option to assist in the promotion of INCMGA0012 in Zai Lab’s licensed territories.

Research and development expenses for the three and nine months ended September 30, 2021 were net of $3.2 million of costs reimbursed by Zai Lab. Research and development expenses for the three and nine months ended September 30, 2020 were net of $0.0 million and $0.2 million, respectively, of costs reimbursed by Zai Lab. At September 30, 2021 and December 31, 2020, $0.8 million and $0.6 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets.

MorphoSys

In January 2020, we entered into a Collaboration and License Agreement with MorphoSys AG and MorphoSys US Inc., a wholly-owned subsidiary of MorphoSys AG (together with MorphoSys AG, “MorphoSys”), covering the worldwide development and commercialization of MOR208 (tafasitamab), an investigational Fc engineered monoclonal antibody directed against the target molecule CD19 that is currently in clinical development by MorphoSys. MorphoSys has exclusive worldwide development and commercialization rights to tafasitamab under a June 2010 collaboration and license agreement with Xencor, Inc. In December 2019, MorphoSys submitted a Biologics License Application to the FDA for tafasitamab for the treatment of relapsed or refractory diffuse large B cell lymphoma. The agreement became effective in March 2020 after clearance by the German and Austrian antitrust authorities and expiration of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976.

Under the terms of the agreement, we received exclusive commercialization rights outside of the United States, and MorphoSys and we have co-commercialization rights in the United States, with respect to tafasitamab. MorphoSys is responsible for leading the commercialization strategy and booking all revenue from sales of tafasitamab in the United States, and we and MorphoSys are both responsible for commercialization efforts in the United States and will share equally the profits and losses from the co-commercialization efforts. We will lead the commercialization strategy outside of the United States, and will be responsible for commercialization efforts and book all revenue from sales of tafasitamab outside of the United States, subject to our royalty payment obligations set forth below. We and MorphoSys have agreed to co-develop tafasitamab and to share development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55% of such costs and MorphoSys responsible for 45% of such costs. Each company is responsible for funding any independent development activities, and we are responsible for funding development activities specific to territories outside of the United States. All development costs related to the collaboration are subject to a joint development plan.

In March 2020, we paid MorphoSys an upfront non-refundable payment of $750.0 million which was recorded in research and development expense on the condensed consolidated statement of operations for the three months ended March 31, 2020. MorphoSys is eligible to receive up to $740.0 million in future contingent development and regulatory milestones and up to $315.0 million in commercialization milestones as well as tiered royalties ranging from the mid-teens

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

In July 2020, we and MorphoSys announced that the FDA approved MONJUVI® (tafasitamab-cxix) in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not otherwise specified, including DLBCL arising from low grade lymphoma, and who are not eligible for autologous stem cell transplant. MONJUVI was approved under accelerated approval based on overall response rate. In August 2021, we and MorphoSys announced that the European Commission granted conditional marketing authorization for MINJUVI (tafasitamab) in combination with lenalidomide, followed by MINJUVI monotherapy, for the treatment of adult patients with relapsed or refractory DLBCL who are not eligible for ASCT.

In addition, under the collaboration agreement and pursuant to a related purchase agreement, we agreed to purchase American Depositary Shares (“ADSs”), each representing 0.25 of an ordinary share of MorphoSys AG, for an aggregate purchase price of $150.0 million or $41.33 per ADS (such ADSs to be purchased, the “New ADSs”). We agreed, subject to limited exceptions, not to sell or otherwise transfer any of the New ADSs for an 18-month period after the closing date of the sale. We completed the purchase of the ADSs on March 3, 2020 when the closing price on The Nasdaq Stock Market was $27.65 per ADS. The New ADSs were not registered under the Securities Act of 1933 on the purchase date, and accordingly, we estimated a discount for lack of marketability on the shares of $4.9 million, which resulted in a net fair value of the shares on the issuance date of $95.5 million. Of the $150.0 million aggregate purchase price paid, $95.5 million was allocated to our stock purchase in MorphoSys and was recorded within long term investments and $54.5 million, representing the premium paid on the purchase, was allocated to research and development expense. The fair market value of our long term investment in MorphoSys as of September 30, 2021 and December 31, 2020 was $42.7 million and $102.9 million, respectively.

We concluded MorphoSys is not a VIE because it has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest. As of September 30, 2021, we owned approximately 3% of the outstanding shares of MorphoSys common stock and there are several other stockholders who hold larger positions of MorphoSys. As we do not hold a significant position of the voting shares of MorphoSys and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment. We intend to hold the investment in MorphoSys for the foreseeable future and therefore, are accounting for our shares held in MorphoSys at fair value, and the investment is marked to market through earnings in each reporting period. Given our intent to hold the investment for the foreseeable future, we have classified the investment within long term investments on the accompanying condensed consolidated balance sheets. For the three and nine months ended September 30, 2021, we recorded an unrealized loss of $27.3 million and $60.2 million, respectively, based on the change in fair value of MorphoSys’ common stock during these periods. For the three and nine months ended September 30, 2020, we recorded an unrealized gain of $0.9 million and $18.5 million, respectively, based on the change in fair value of MorphoSys’ common stock during these periods.

Our 50% share of the United States loss for the commercialization of tafasitamab for the three and nine months ended September 30, 2021 was $9.1 million and $29.5 million, respectively, and is recorded as collaboration loss sharing on the condensed consolidated statement of operations. Our 50% share of the United States loss for the commercialization of tafasitamab for the three and nine months ended September 30, 2020 was $15.0 million and $30.4 million, respectively, and is recorded as collaboration loss sharing on the condensed consolidated statement of operations. Research and development expenses for the three and nine months ended September 30, 2021, includes $21.5 million and $55.8 million, respectively, related to our 55% share of the co-development costs for tafasitamab. Research and development expenses for the three and nine months ended September 30, 2020, includes $23.8 million and $51.1 million, respectively, related to our 55% share of the co-development costs for tafasitamab. At September 30, 2021 and December 31, 2020, $52.3 million and $54.2 million, respectively, was included in accrued and other liabilities on the condensed consolidated balance sheets for amounts due to MorphoSys under the agreement.

Nimble

In September 2020, we entered into a Collaboration and License Agreement with Nimble Therapeutics, Inc. (“Nimble”). Under the terms of this agreement, Nimble will utilize their peptide synthesis, screening and optimization platform for discovery and validation of peptides against specified targets. Under the agreement, Nimble is eligible to receive up to $8.0 million in future contingent discovery milestones and up to $127.0 million in future contingent development and regulatory milestones. Additionally, in the event of successful commercialization, Nimble is eligible to receive up to $130.0 million in future contingent sales milestones and tiered royalties on net sales in the low single digits.

InnoCare

In August 2021, we entered into a Collaboration and License Agreement with Sunny Investments Limited, a wholly-owned subsidiary of InnoCare Pharma Limited (“InnoCare”). InnoCare received development and exclusive commercialization rights to tafasitamab in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. In September 2021, we recognized an upfront payment under this agreement of $35.0 million upon our transfer of technology related to the licensed product candidate to InnoCare, which was recorded in milestone and contract revenues on the condensed consolidated statement of operations. Under the terms of this agreement, we are eligible to receive up to an additional $45.0 million in potential development and regulatory milestones. We recognize development and regulatory milestones upon confirmation of achievement of the event, as development and regulatory approvals are events not controllable by us but rather development activities of InnoCare and decisions made by regulatory agencies. In the event of commercialization, we are eligible to receive up to $37.5 million in potential sales milestones from InnoCare. We will recognize sales milestones in the corresponding period of the product sale upon confirmation of net sales milestone threshold achievement by InnoCare. We are also eligible to receive tiered royalties from the low to mid-twenties on future product sales resulting from the collaboration.

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”). Axatilimab, currently in clinical development by Syndax, is a monoclonal antibody that blocks the colony stimulating factor-1 (CSF-1) receptor. Syndax has exclusive worldwide development and commercialization rights to axatilimab under a June 2016 license agreement with UCB Biopharma Sprl.

Under the terms of the agreement, we will receive exclusive commercialization rights outside of the United States, and Syndax and we will have co-commercialization rights in the United States, with respect to axatilimab in GVHD and potentially other indications. We will be responsible for leading the global commercialization strategy and Syndax has the option to participate in commercialization efforts in the United States. We and Syndax will share equally the profits and losses from the co-commercialization efforts in the United States. We and Syndax have agreed to co-develop axatilimab and to share development costs associated with global clinical trials, with Incyte responsible for 55% of such costs and Syndax responsible for 45% of such costs and we will be responsible for funding development activities specific to territories outside of the United States. Each company will be responsible for funding any independent development activities. All development costs related to the collaboration will be subject to a joint development plan.

The effectiveness of the agreement is conditioned upon expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which we expect to take place in the fourth quarter of 2021. We have agreed to pay Syndax, upon the effectiveness of the agreement, an upfront non-refundable payment of $117.0 million. Syndax will be eligible to receive up to $220.0 million in future contingent development and regulatory milestones and $230.0 million in commercialization milestones, as well as tiered royalties in the mid-teens on net sales in Europe in Japan and low double digits on net sales in the rest of the world outside of the United States. Syndax’s right to receive royalties in any particular country will expire upon the last to occur of (a) the expiration of the licensed patent rights covering the licensed product in that particular country, (b) a specified period of time after the first post-marketing authorization sale of a licensed product in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country.

In addition, under the collaboration agreement and pursuant to a related stock purchase agreement, we agreed to purchase 1,421,523 shares of common stock of Syndax for an aggregate purchase price of $35.0 million, or $24.62 per share. We agreed, subject to limited exceptions, not to sell or otherwise transfer any of the shares for a six month period after the closing date of the sale. Closing of the purchase of the shares is expected to occur concurrently with the effectiveness of the collaboration agreement, and is subject to customary conditions.

Stock Compensation

9 Months Ended

Sep. 30, 2021

Stock Compensation

Stock Compensation

10. Stock compensation

We recorded $42.7 million and $134.8 million of stock compensation expense on our condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively. We recorded $43.8 million and $132.6 million of stock compensation expense on our condensed consolidated statements of operations for the three and nine months ended September 30, 2020, respectively. Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $26.3 million, $84.2 million, $29.0 million and $90.2 million for the three and nine months ended September 30, 2021 and 2020, respectively. Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $15.9 million, $49.5 million, $14.6 million and $41.7 million for the three and nine months ended September 30, 2021 and 2020, respectively. Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $0.5 million, $1.1 million, $0.2 million and $0.7 million, respectively, for the three and nine months ended September 30, 2021 and 2020. For the three and nine months ended September 30, 2021 and 2020, we capitalized $0.6 million, $1.8 million, $0.2 million and $0.5 million, respectively, of stock compensation expense as part of the cost of assets.

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 Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,								September 30,
	2021		2020		2021		2020		2021		2020		2021		2020
Average risk-free interest rates	0.76	%	0.28	%	0.60	%	0.85	%	0.28	%	0.13	%	0.22	%	0.17	%
Average expected life (in years)	5.16		5.15		5.00		4.96		0.50		0.50		0.50		0.50
Volatility	38	%	39	%	39	%	40	%	25	%	38	%	31	%	46	%
Weighted-average fair value (in dollars)	28.84		36.73		29.32		32.79		18.20		22.83		18.82		19.07

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.

Option activity under our 2010 Amended and Restated Stock Incentive Plan (the “2010 Stock Plan”) was as follows:


	Shares Subject to
	Outstanding Options
		Weighted Average
	Shares	Exercise Price
Balance at December 31, 2020	12,115,288	$	88.31
Options granted	2,419,885	$	85.80
Options exercised	(555,102)	$	67.63
Options cancelled	(855,329)	$	91.81
Balance at September 30, 2021	13,124,742	$	88.49

In July 2016, we revised the terms of our annual stock option grants to provide that new option grants would generally have a 10-year term and vest over four years, with 25% vesting after one year and the remainder vesting in 36 equal monthly installments. Previously, our option grants generally had 7-year terms and vested over three years, with 33% vesting after one year and the remainder vesting in 24 equal monthly installments.

Restricted stock unit (“RSU”) and performance share (“PSU”) award activity under the 2010 Stock Plan was as follows:


	Shares Subject to
	Outstanding Awards
	Shares	Grant Date Value
Balance at December 31, 2020	3,284,583	$	87.42
RSUs granted	1,764,067	$	85.12
PSUs granted	107,088	$	83.58
RSUs released	(830,436)	$	87.89
PSUs released	(200,353)	$	68.08
RSUs cancelled	(324,075)	$	90.23
PSUs cancelled	(166,727)	$	72.60
Balance at September 30, 2021	3,634,147	$	87.07

In January 2014, we began granting RSUs and PSUs 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 prior to July 2016 was subject to cliff vesting after three years. In July 2016, we revised the terms of our RSU grants to provide that the awards will vest 25% annually over four years.

In June 2018, we granted 190,000 RSUs and 446,500 PSUs under long term incentive plans with performance and/or service-based milestones with graded and/or cliff vesting over three to four years. In April 2019, we granted an additional 100,000 PSUs under one of the existing long term incentive plans with performance based milestones and cliff vesting. For one of the existing long term incentive plans, under which 106,500 PSUs were granted, the actual number of shares of our common stock into which each PSU may convert was subject to a multiplier of up to 267% based on the level at which the performance conditions were achieved. The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 142% based on the performance conditions being achieved as of March 31, 2019 and will continue to vest through June 2022. For an existing long term incentive plan, under which 150,000 PSUs were granted, the actual number of shares of our common stock into which each PSU may convert was subject to a multiplier of up to 100% if all performance conditions were achieved or 0% if no performance conditions were achieved. The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 100% based on the performance conditions being achieved as of December 31, 2019 and will cliff vest in June 2021. For the remaining long term incentive plan, under which 290,000 PSUs were granted, the actual number of shares of our common stock into which each PSU may convert was subject to a multiplier of up to 100% based on the level at which the performance conditions were achieved. The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 50% based on the performance conditions achieved as of the June 30, 2021 end of the performance period and will cliff vest in June 2022.

In July 2018, we granted 77,243 PSUs to executives with performance milestones and graded vesting over four years. The shares of our common stock into which each PSU may convert is subject to a multiplier up to 150% based on the level at which the performance condition is achieved. The actual number of shares of our common stock into which each PSU converted was at a multiplier of 83% based on the performance condition being achieved as of December 31, 2018. These PSUs will continue to vest through July 2022.

In July 2019, we granted 86,975 PSUs to executives with a performance milestone and graded vesting over four years. The shares of our common stock into which each PSU may convert is subject to a multiplier up to 125% based on the level at which the performance condition is achieved. The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 101.8% based on the performance condition being achieved as of December 31, 2019. These PSUs will continue to vest through July 2023.

In July 2020, we granted 92,347 PSUs to executives with performance milestones and cliff vesting on the third anniversary from date of grant. The shares of our common stock into which each PSU may convert is subject to a multiplier up to 200% based on the level at which the financial and developmental performance conditions are achieved over the service period which ends December 31, 2022.

In July 2021, we granted 107,088 PSUs to executives with performance milestones and cliff vesting on the third anniversary from date of grant. The shares of our common stock into which each PSU may convert is subject to a multiplier up to 150% based on the level at which the financial and developmental performance conditions are achieved over the service period which ends December 31, 2023.

Compensation expense for the above performance-based awards 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. For the three and nine months ended September 30, 2021 we recorded $1.7 million and $5.0 million of stock compensation expense for PSUs on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2020 we recorded $2.7 million and $11.4 million of stock compensation expense for PSUs on our condensed consolidated statements of operations.

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


		Shares Available
		for Grant
Balance at December 31, 2020		5,515,182
Additional authorization		9,500,000
Options, RSUs and PSUs granted		(6,162,583)
Options, RSUs and PSUs cancelled		1,567,041
Balance at September 30, 2021		10,419,640

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 September 30, 2021, was $77.3 million, which is expected to be recognized over the weighted average period of approximately 1.3 years. Total compensation cost of RSUs granted but not yet vested, as of September 30, 2021, was $172.3 million, which is expected to be recognized over the weighted average period of approximately 2.0 years. Total compensation cost of PSUs granted but not yet vested, as of September 30, 2021, was $19.2 million, which is expected to be recognized over the weighted average period of 1.6 years, should the underlying performance conditions be deemed probable of achievement.

Accrued and Other Current Liabilities

9 Months Ended

Sep. 30, 2021

Accrued and Other Current Liabilities

Accrued and Other Current Liabilities

11. Accrued and other current liabilities

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


	September 30,		December 31,
	2021		2020
Royalties	$	142,446	$	106,011
Clinical related costs		125,290		115,897
Sales allowances		105,749		73,204
Construction in progress		23,892		22,807
Operating lease liabilities		9,849		12,674
Other current liabilities		74,653		47,811
Total accrued and other current liabilities	$	481,879	$	378,404

Employee Benefit Plans

9 Months Ended

Sep. 30, 2021

Employee Benefit Plans

Employee Benefit Plans

12. 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 nine months ended September 30, 2021 was $4.4 million and $12.8 million, respectively. Defined contribution expense for the three and nine months ended September 30, 2020 was $3.5 million and $10.1 million, respectively.

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				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Service cost	$	1,975	$	1,523	$	5,927	$	4,457
Interest cost		23		49		68		142
Expected return on plan assets		(15)		(32)		(45)		(93)
Amortization of prior service cost		54		54		162		161
Amortization of actuarial losses		288		166		864		500
Net periodic benefit cost	$	2,325	$	1,760	$	6,976	$	5,167

The components of net periodic benefit cost other than the service cost component are included in other income (expense), net on the condensed consolidated statements of operations. We expect to contribute a total of $5.3 million to the pension plans in 2021 inclusive of the amounts contributed to the plan during the current period.

- Definition

The entire disclosure for retirement benefits.

+ References

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+ Details

Income Taxes

9 Months Ended

Sep. 30, 2021

Income Taxes

Income Taxes

13. Income taxes

For the three and nine months ended September 30, 2021, we recorded income tax expense of approximately $27.7 million and $65.7 million, respectively. For the three and nine months ended September 30, 2020, we recorded income tax expense of approximately $11.7 million and $45.2 million, respectively. The tax expense for the three and nine months ended September 30, 2021 and 2020 represents primarily federal and state tax liabilities that are not fully sheltered by net operating losses or research and development tax credit carryforwards.

As of September 30, 2021, a full valuation allowance continues to be recorded against our U.S. and Swiss net deferred tax assets. Based upon our analysis of our historical operating results, as well as projections of our future taxable income (losses) during the periods in which the temporary differences will be recoverable, we believe the uncertainty regarding the realization of our U.S. and Swiss net deferred tax assets requires a full valuation allowance against such net assets as of September 30, 2021. When performing our assessment on projections of future taxable income (losses), we consider factors such as the likelihood of regulatory approval and commercial success of products currently under development, among other factors.

The balance of our unrecognized tax benefits (including penalties and interest) increased by approximately $7.3 million during the nine months ended September 30, 2021. The overall net increase is primarily driven by positions taken on prior year returns in addition to tax benefits related to current year operations and research and development tax credits. After considering valuation allowance impacts, the change in unrecognized tax benefits resulted in a $5.4 million increase to noncurrent other liabilities on the condensed consolidated balance sheet.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Net Income (Loss) Per Share

9 Months Ended

Sep. 30, 2021

Net Income (Loss) Per Share

Net Income (Loss) Per Share

14. Net income (loss) per share

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share data)	2021		2020		2021		2020
Basic Net Income (Loss) Per Share
Basic net income (loss)	$	181,739	$	(15,203)	$	384,730	$	(445,547)
Weighted average common shares outstanding		220,845		218,784		220,243		217,684

Basic net income (loss) per share	$	0.82	$	(0.07)	$	1.75	$	(2.05)

Diluted Net Income (Loss) Per Share
Diluted net income (loss)	$	181,739	$	(15,203)	$	384,730	$	(445,547)
Weighted average common shares outstanding		220,845		218,784		220,243		217,684

Dilutive stock options and awards		1,403		—		1,870		—

Weighted average shares used to compute diluted net income (loss) per share		222,248		218,784		222,113		217,684

Diluted net income (loss) per share	$	0.82	$	(0.07)	$	1.73	$	(2.05)

The potential common shares that were excluded from the diluted net income (loss) per share computation are as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2021	2020	2021	2020
Outstanding stock options and awards	11,841,440	15,447,389	9,917,824	15,447,389
Common shares issuable upon conversion of the 1.25% Convertible Senior Notes due 2020	—	231,339	—	231,339
Total potential common shares excluded from diluted net income (loss) per share computation	11,841,440	15,678,728	9,917,824	15,678,728

Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies

Commitments and Contingencies

15. Commitments and contingencies

Commitments

In August 2021, we entered into a revolving credit and guaranty agreement (the “Credit Agreement”) among the Incyte Corporation, as borrower, subsidiary Incyte Holdings Corporation, as a guarantor, the lenders from time to time party thereto (the “Lenders”), J.P. Morgan Chase Bank, N.A. as administrative agent, and the other financial institutions party thereto. Under the Credit Agreement, the Lenders have committed to provide an unsecured three-year revolving credit facility in an aggregate principal amount of up to $500.0 million. 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, the Company’s pro forma consolidated leverage ratio would not exceed 0.25 above its consolidated leverage ratio in effect immediately prior to giving effect to such increase.

Loans under the Credit Agreement will bear interest, at our option, at a per annum rate equal to either (a) a base rate plus an applicable rate per annum varying from 0.125% to 0.875% depending on our consolidated leverage ratio or (b) a Eurodollar rate 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 amount range from 0.150% per annum to 0.225% per annum, based on our consolidated leverage ratio.

As of September 30, 2021, we are in compliance with all financial and operational covenants under the terms of the Credit Agreement and there were no outstanding borrowings or letters of credit outstanding. We capitalized approximately $1.3 million in debt issuance costs related to the execution of the Credit Agreement. The debt issuance costs are being amortized over the term of the facility.

Contingencies

In December 2018, we received a civil investigative demand from the U.S. Department of Justice (“DOJ”) for documents and information relating to our speaker programs and patient assistance programs, including our support of non-profit organizations that provide financial assistance to eligible patients. In November 2019, the qui tam complaint underlying the DOJ inquiry was unsealed (“Complaint”), at which time we learned that a former employee whom we had terminated had made certain allegations relating to the programs described above. We filed an Answer to the Complaint on January 22, 2020 and on November 12, 2020 we filed a Motion for Summary Judgment (“Motion”). All briefing on the Motion was completed on December 22, 2020. While we deny that any improper claims were submitted to government payers, we agreed on May 4, 2021 to settle the matter with the DOJ Civil Division for $12.6 million, plus certain statutory fees, which was recorded in selling, general and administrative expense during the nine months ended September 30, 2021.

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.

We have entered into the collaboration agreements described in Note 9, 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.

Summary of significant accounting policies (Policies)	9 Months Ended
Summary of significant accounting policies (Policies)	Sep. 30, 2021
Summary of significant accounting policies
Basis of presentation	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 September 30, 2021, the condensed consolidated statements of operations, comprehensive income (loss), and stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 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, 2020 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, 2020.
Principles of Consolidation	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.
Foreign Currency Translation	Foreign Currency Translation. Operations in non-U.S. entities are recorded in the functional currency of each entity. For financial reporting purposes, the functional currency of an entity is determined by a review of the source of an entity's most predominant cash flows. The results of operations for any non-U.S. dollar functional currency entities are translated from functional currencies into U.S. dollars using the average currency rate during each month. Assets and liabilities are translated using currency rates at the end of the period. Adjustments resulting from translating the financial statements of our foreign entities that use their local currency as the functional currency into U.S. dollars are reflected as a component of other comprehensive income (loss). Transaction gains and losses are recorded in other income (expense), net, in the condensed consolidated statements of operations.
Use of Estimates	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.
Concentrations of Credit Risk	Concentrations of Credit Risk. Cash, cash equivalents, marketable securities, and trade receivables are financial instruments which potentially subject us to concentrations of credit risk. The estimated fair value of financial instruments approximates the carrying value based on available market information. By policy, we invest our excess available funds primarily in U.S. government debt securities which are securities issued or guaranteed by the U.S. government and money market funds that meet certain guidelines, which limits exposure to potential credit losses. Our receivables mainly relate to our product sales and collaborative agreements with pharmaceutical companies. We have not experienced any significant credit losses on cash, cash equivalents, marketable securities, or trade receivables to date and do not require collateral on receivables.
Current Expected Credit Losses	Current Expected Credit Losses. Financial assets measured at amortized cost are assessed for future expected credit losses under guidance within ASC 326, Financial Instruments – Credit Losses, to determine if application of an expected credit losses reserve is necessary. On a quarterly basis, receivables that resulted from revenue transactions within the scope of ASC 606, Revenue from Contracts with Customers, and recognized on an amortized cost basis are reviewed on a customer-level basis to analyze expectations of future collections based upon past history of collections, payment, aging of receivables and viability of the customer to continue payment, as well as estimates of future economic conditions. Receivables generally consist of two types: receivables from collaborative agreements, including milestones, reimbursements for agreed-upon activities and sales royalties; and receivables from customer product sales. Collaborative agreement receivables are closely monitored relationships with select, reputable industry peers. Collection of receivables is assessed within each collaborative partnership on a quarterly basis, including evaluation of each entity’s credit quality, financial health and past history of payment. Customer product sales receivables are independently evaluated on a monthly basis, on which unusual items or aged receivables are closely monitored for signs of credit deterioration, or indications of payment refusal. Customer product sales are with specialty pharmaceutical distributors, wholesalers, and certain public and private institutions, some of which whose financial obligations are funded by various government agencies.
Cash and Cash Equivalents	Cash and Cash Equivalents. Cash and cash equivalents are held in banks or in custodial accounts with banks. Cash equivalents are defined as all liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash.
Marketable Securities-Available-for-Sale	Marketable Securities—Available-for-Sale. Our marketable securities consist of investments in U.S. government debt securities that are classified as available-for-sale. Available-for-sale securities are carried at fair value, based on quoted market prices and observable inputs, with unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. We classify marketable securities that are available for use in current operations as current assets on the condensed consolidated balance sheets. Realized gains and losses and declines in value judged to be other than temporary for available-for-sale securities are included in other income (expense), net on the condensed consolidated statements of operations. The cost of securities sold is based on the specific identification method.
Accounts Receivable	Accounts Receivable. As of September 30, 2021 and December 31, 2020, we had no allowance for doubtful accounts. We provide an allowance for doubtful accounts based on management’s assessment of the collectability of specific customer accounts, which includes consideration of the credit worthiness and financial condition of those customers, aging of such receivables, history of collectability with the customer and the general economic environment. We record an allowance to reduce the receivables to the amount that is expected to be collected.
Inventory	Inventory. Inventories are determined at the lower of cost and net realizable value with cost determined under the specific identification method and may consist of raw materials, work in process and finished goods. We capitalize inventory after FDA approval as the related costs are expected to be recoverable through the commercialization of the product. Costs incurred prior to FDA approval are recorded as research and development expense in our statements of operations. Raw materials and work-in-process inventory are not subject to expiration and the shelf life of finished goods inventory is approximately 36 months from the start of manufacturing of the finished goods. We evaluate for potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life. We build demand forecasts by considering factors such as, but not limited to, overall market potential, market share, market acceptance and patient usage. We classify inventory as current on the condensed consolidated balance sheets when we expect inventory to be consumed for commercial use within the next twelve months.
Variable Interest Entities	Variable Interest Entities. We perform an initial and ongoing evaluation of the entities with which we have variable interests, such as equity ownership, in order to identify entities (i) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support or (ii) in which the equity investors lack an essential characteristic of a controlling financial interest as variable interest entities (“VIE” or “VIEs”). If an entity is identified as a VIE, we perform an assessment to determine whether we have both (i) the power to direct activities that most significantly impact the VIE’s economic performance and (ii) have the obligation to absorb losses from or the right to receive benefits of the VIE that could potentially be significant to the VIE. If both of these criteria are satisfied, we are identified as the primary beneficiary of the VIE. As of September 30, 2021, there were no entities in which we held a variable interest which we determined to be VIEs.
Long Term Investments	Long Term Investments. Our long term investments consist of equity investments in common stock of publicly-held companies with whom we have entered into collaboration and license agreements. We classify all of our equity investments in common stock of publicly-held companies as long term investments on our condensed consolidated balance sheets. Our equity investments are accounted for at fair value using readily determinable pricing available on a securities exchange on our condensed consolidated balance sheets. All changes in fair value are reported in the condensed consolidated statements of operations as an unrealized gain (loss) on long term investments. In assessing whether we exercise significant influence over any of the companies in which we hold equity investments, we consider the nature and magnitude of our investment, any voting and protective rights we hold, any participation in the governance of the other company, and other relevant factors such as the presence of a collaboration or other business relationship. Currently, none of our equity investments in publicly-held companies are considered relationships in which we are able to assert control.
Property and Equipment, net	Property and Equipment, net. Property and equipment, net is stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or lease term.
Lease Accounting	Lease Accounting. All leases with a lease term greater than 12 months, regardless of lease type classification, are recorded as an obligation on the balance sheet with a corresponding right-of-use asset. Both finance and operating leases are reflected as liabilities on the commencement date of the lease based on the present value of the lease payments to be made over the lease term. Current operating lease liabilities are reflected in accrued and other current liabilities and noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheet. Right-of-use assets are valued at the initial measurement of the lease liability, plus any initial direct costs or rent prepayments, minus lease incentives and any deferred lease payments. Operating lease right-of-use assets are recorded in property and equipment, net on the condensed consolidated balance sheet and lease cost is recognized on a straight-line basis. For finance leases, expense is recognized as separate amortization and interest expense, with higher interest expense in the earlier periods of a lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the term of the lease. In determining whether a contract contains a lease, asset and service agreements are assessed at onset and upon modification for criteria of specifically identified assets, control and economic benefit.
Other Intangible Assets, net	Other Intangible Assets, net. Other intangible assets, net consist of licensed intellectual property rights acquired in business combinations, which are reported at acquisition date fair value, less accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives using the straight-line method.
Impairment of Long-Lived Assets	Impairment of Long-Lived Assets. Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset. If the expected cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted future cash flows.
Goodwill	Goodwill. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually as of October 1 or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts. A reporting unit is the same as, or one level below, an operating segment. Our operations are currently comprised of a single, entity wide reporting unit. We completed our most recent annual impairment assessment as of October 1, 2020 and determined that the carrying value of our goodwill was not impaired.
Income Taxes	Income Taxes. We account for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts reportable for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The primary factors used to assess the likelihood of realization are our recent history of cumulative earnings or losses, expected reversals of taxable temporary timing differences, forecasts of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets. Upon evaluating and weighting both positive and negative evidence, we concluded that we should continue to maintain the valuation allowance on the majority of our deferred tax assets as of September 30, 2021. We recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any interest and penalties on uncertain tax positions are included within the tax provision. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in March 2020 to provide an estimated $2.2 trillion designed to stimulate the U.S. economy during the COVID-19 pandemic. The Act includes tax relief, government loans, grants and investments for entities in affected industries, which has related accounting and financial reporting impacts. Disclosure for certain income tax accounting measures are required in the period of enactment and disclosure for government loans, investments, grants, and revenue recognition are required in future periods as federal agencies establish rules and procedures to implement the CARES Act. During 2020, we delayed the payment of certain employer payroll tax amounts to future periods as allowed under the Act. We do not expect the CARES Act to have a material impact on our overall financial results, our income tax provision or our liquidity. We have further described the impact and risks of the COVID-19 pandemic on our business in Item 1A. Risk Factors.
Net Income (Loss) Per Share	Net Income (Loss) Per Share. Our basic and diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during all periods presented. Options to purchase stock, restricted stock units and performance stock units are included in diluted earnings per share calculations, unless the effects are anti-dilutive.
Accumulated Other Comprehensive Income (Loss)	Accumulated Other Comprehensive Income (Loss). Accumulated other comprehensive income (loss) consists of unrealized gains or losses on our marketable debt securities that are classified as available-for-sale, foreign currency translation gains or losses and defined benefit pension obligations.
Revenue Recognition	Revenue Recognition. Revenue-generating contracts are assessed under ASC 606, Revenue from contracts with customers, to identify distinct performance obligations, determine the transaction price of the contract and allocate the transaction price to each of the distinct performance obligations. Revenue is recognized when we have satisfied a performance obligation through transferring control of the promised good or service to a customer. Control, in this instance, may mean the ability to prevent other entities from directing the use of, and receiving benefit from, a good or service. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation, which for the Company is generally at a point in time. We also assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer. Product Revenues Our product revenues consist of sales of JAKAFI and PEMAZYRE in the U.S., sales of MINJUVI, PEMAZYRE and ICLUSIG in Europe, and sales of PEMAZYRE in Japan. Product revenues are recognized once we satisfy the performance obligation at a point in time under the revenue recognition criteria as described above. We sell JAKAFI and PEMAZYRE to our customers in the U.S., which include specialty pharmacies and wholesalers. We sell MINJUVI, PEMAZYRE and ICLUSIG to our customers in the European Union and certain other jurisdictions, which include retail pharmacies, hospital pharmacies and distributors. We sell PEMAZYRE in Japan to an exclusive wholesaler. We recognize revenues for product received by our customers net of allowances for customer credits, including estimated rebates, chargebacks, discounts, returns, distribution service fees, patient assistance programs, and government rebates, such as Medicare Part D coverage gap reimbursements in the U.S. Product shipping and handling costs are included in cost of product revenues. Customer Credits: Our customers are offered various forms of consideration, including allowances, service fees and prompt payment discounts. We expect our customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. Service fees are also deducted from total product sales as they are earned. Rebates and Discounts: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program in the U.S. and mandated discounts in Europe in markets where government-sponsored healthcare systems are the primary payers for healthcare. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers. The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launches. Our estimates for expected utilization of rebates are based on data received from our customers. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. Chargebacks: Chargebacks are discounts that occur when certain contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, purchase directly from our wholesalers. Contracted customers generally purchase the product at a discounted price. The wholesalers, in turn, charges back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers. In addition to actual chargebacks received we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. Additionally, beginning in January 2020, the amount of spending required by eligible patients in the Medicare Part D insurance coverage gap increased 30% due to the expiration of a provision in the Patient Protection and Affordable Care Act, which now results in a change in the True Out of Pocket (TrOOP) calculation methodology. The methodological change has resulted in an increase in required spending by patients and, in turn, an increase in manufacturers’ contributions on behalf of patients in the Medicare Part D insurance coverage gap. Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators. Product Royalty Revenues Royalty revenues on commercial sales for ruxolitinib (marketed as JAKAVI® outside the United States) by Novartis Pharmaceutical International Ltd. (“Novartis”) are based on net sales of licensed products in licensed territories as provided by Novartis. Royalty revenues on commercial sales for baricitinib (marketed as OLUMIANT) by Eli Lilly and Company (“Lilly”) are based on net sales of licensed products in licensed territories as provided by Lilly. Royalty revenues on commercial sales for capmatinib (marketed as TABRECTA®) by Novartis are based on net sales of licensed products in the licensed territories as provided by Novartis. We recognize royalty revenues in the period the sales occur. Milestone and Contract Revenues For each collaborative research, development and/or commercialization agreement that results in revenue under the guidance of ASC 606 we identify all material performance obligations, which may include the license to intellectual property and know-how, research and development activities and/or other activities. In order to determine the transaction price, in addition to any upfront payment, we estimate the amount of variable consideration, including milestone payments, at the outset of the contract utilizing the most likely amount method. The most likely amount method is used since the milestone payments have a binary outcome (i.e., we receive all or none of the milestone payment). We constrain the estimate of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, management considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. Once the estimated transaction price is established, amounts are allocated to the performance obligations that have been identified. The transaction price is generally allocated to each separate performance obligation on a relative standalone selling price basis. Out-licensing arrangements contain the right to use functional intellectual property, which is the underlying performance obligation of these collaborative arrangements. If the license of our intellectual property is determined to be distinct from other performance obligations in the arrangement, the functional intellectual property that is transferred to the collaborative partner at the onset of the arrangement is concluded to have significant standalone functionality and value at the point in time at which the intellectual property is made available to the collaborative partner. For licenses that are not distinct from other obligations identified in the arrangement, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, we apply an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. For the three and nine months ended September 30, 2021 and 2020, we had no revenues from intellectual property licenses recognized over time. For milestone revenues related to sales-based achievements, we recognize the milestone revenues in the corresponding period of the product sale, in accordance with the guidance of ASC 606-10-55-65 for contracts that include a license to intellectual property and the license is the predominant item to which the product sale relates. Subsequent to the transfer of the intellectual property, we may earn milestones through achievement of pre-specified developmental or regulatory events and, as such, milestones are accounted for as variable consideration. We include developmental or regulatory milestones in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the milestone is subsequently resolved. Under the agreements currently in place, we do not consider these events to be within our control, but rather dependent upon the development activities of our collaborative partners and the decisions made by regulatory agencies. Accordingly, these milestones are not included in the transaction price until the counterparty, or third-party in the event of a regulatory submission, confirms the satisfaction or completion of the milestone triggering event. Given the high level of uncertainty of achievement, variable consideration associated with milestones are fully constrained until confirmation of the satisfaction or completion of the milestone by the third-party. Generally, the milestone events contained in our collaboration agreements coincide with the progression of our drugs from development, to regulatory approval and then to commercialization. The value of these milestones is dictated within the contract and is fixed upon achievement and reflects the amount of consideration which we expect to be entitled to in exchange for the satisfaction of that milestone. The process of successfully discovering a new development candidate, having it approved and successfully commercialized is highly uncertain. As such, the milestone payments we may earn from our partners involve a significant degree of risk to achieve and therefore, subsequent milestone payments due to Incyte are recognized as revenue at the point in time when such milestones are achieved. Our collaboration agreements may also include an option for the collaborative partner to elect to participate in research and development activities, such as shared participation in additional clinical trials using the compound. The presence of additional options for future participatory activities are assessed to determine if they represent material rights offered by us to the collaborative partner. We also determine whether the reimbursement of research and development expenses should be accounted for as collaborative revenues or an offset to research and development expenses in accordance with the provisions of gross or net revenue presentation and recognize the corresponding revenues or records the corresponding offset to research and development expenses as incurred. Our collaborative agreements may also include provisions for additional future collaborative efforts, such as options for shared commercialization staffing or licensing of additional molecules, involvement in joint committees, or options for inclusion in negotiations of future supply rights, which at the time of each collaborative agreement’s inception, are assessed to determine if these meet the definition of a performance obligation under ASC 606. Cost of Product Revenues Cost of product revenues includes all product related costs. In addition, cost of product revenues include low single-digit royalties under our collaboration and license agreement to Novartis on all future sales of JAKAFI in the United States and the amortization of our licensed intellectual property for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years from the date of acquisition on June 1, 2016 of all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l. (since renamed Incyte Biosciences Luxembourg S.à.r.l.) from ARIAD Pharmaceuticals, Inc. (“ARIAD”). Cost of product revenues also includes employee personnel costs, including stock compensation, for those employees dedicated to the production of our commercial products.
Research and Development Costs	Research and Development Costs. Our policy is to expense research and development costs as incurred, including amounts funded by research and development collaborations. Research and development expenses are comprised of costs we incur in performing research and development activities, including salary and benefits; stock-based compensation expense; outsourced services and other direct expenses, including clinical trial and pharmaceutical development costs; collaboration payments; expenses associated with drug supplies that are not being capitalized; and infrastructure costs, including facilities costs and depreciation expense. If a collaboration is a cost-sharing arrangement in which both we and our collaborator perform development work and share costs, we also recognize, as research and development expense in the period when our collaborator incurs development expenses, our portion of the co-development expenses that we are obligated to reimburse. We often contract with contract research organizations (“CROs”) to facilitate, coordinate and perform agreed upon research and development of a new drug. To ensure that research and development costs are expensed as incurred, we record monthly accruals for clinical trials and preclinical testing costs based on the work performed under the contract. These CRO contracts typically call for the payment of fees for services at the initiation of the contract and/or upon the achievement of certain clinical trial milestones. In the event that we prepay CRO fees, we record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed. Most professional fees, including project and clinical management, data management, monitoring, and medical writing fees are incurred throughout the contract period. These professional fees are expensed based on their percentage of completion at a particular date. Our CRO contracts generally include pass through fees. Pass through fees include, but are not limited to, regulatory expenses, investigator fees, travel costs, and other miscellaneous costs, including shipping and printing fees. We expense the costs of pass through fees under our CRO contracts as they are incurred, based on the best information available to us at the time. The estimates of the pass through fees incurred are based on the amount of work completed for the clinical trial and are monitored through correspondence with the CROs, internal reviews and a review of contractual terms. The factors utilized to derive the estimates include the number of patients enrolled, duration of the clinical trial, estimated patient attrition, screening rate and length of the dosing regimen. CRO fees incurred to set up the clinical trial are expensed during the setup period. Under our clinical trial collaboration agreements we may be reimbursed for certain development costs incurred. Such costs are recorded as a reduction of research and development expense in the period in which the related expense is incurred.
Stock Compensation and Long-term Incentive Plans	Stock Compensation. Share-based payment transactions with employees, which include stock options, restricted stock units (“RSUs”) and performance shares (“PSUs”), are recognized as compensation expense over the requisite service period based on their estimated fair values as well as expected forfeiture rates. The stock compensation process requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility over the option term and expected option lives, as well as expected forfeiture rates and the probability of PSUs vesting. The fair value of stock options, which are subject to graded vesting, are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of RSUs that are subject to cliff vesting are recognized as compensation expense over the requisite service period using the straight-line attribution method, and the fair value of RSUs that are subject to graded vesting are recognized as compensation expense over the requisite service period using the accelerated attribution method. The fair value of PSUs are recognized as compensation expense beginning at the time in which the performance conditions are deemed probable of achievement, which we assess as of the end of each reporting period. Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting. Long Term Incentive Plans. We have long term incentive plans which provide eligible employees with the opportunity to receive performance and service-based incentive compensation, which may be comprised of cash, stock options, restricted stock units and/or performance shares. The payment of cash and the grant or vesting of equity may be contingent upon the achievement of pre-determined regulatory, sales and internal performance milestones.
Advertising Expenses	Advertising Expenses. Advertising expenses, comprised primarily of television, radio, print media and Internet advertising, are expensed as incurred and are included in selling, general, and administrative expenses. For the three and nine months ended September 30, 2021, advertising expenses were approximately $13.7 million and $32.0 million, respectively. For the three and nine months ended September 30, 2020, advertising expenses were approximately $6.4 million and $16.5 million, respectively.
Acquisition-Related Contingent Consideration	Acquisition-Related Contingent Consideration. Acquisition-related contingent consideration consists of our future royalty obligations on future net sales of ICLUSIG to Takeda Pharmaceutical Company Limited, which acquired ARIAD (“Takeda”). Acquisition-related contingent consideration was recorded on the acquisition date of June 1, 2016 at the estimated fair value of the obligation, in accordance with the acquisition method of accounting. The fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. The fair value of the acquisition-related contingent consideration is remeasured each reporting period, with changes in fair value recorded in the condensed consolidated statements of operations.
Collaboration loss sharing	Collaboration loss sharing. Under collaboration and license agreements with shared commercialization efforts, we record our share of the losses from the co-commercialization efforts in collaboration loss sharing on the condensed consolidated statement of operations. For the three and nine months ended September 30, 2021 and 2020, collaboration loss sharing represents our 50% share of the United States loss for commercialization of MONJUVI (tafasitamab-cxix) under our agreement with MorphoSys.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance applies to all entities and aims to reduce the complexity of tax accounting standards while enhancing reporting disclosures. This guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein. We adopted this guidance for the period beginning January 1, 2021. Upon adoption, ASU No. 2019-12 had an immaterial impact on the condensed consolidated financial statements.

Revenues (Tables)

9 Months Ended

Sep. 30, 2021

Revenues

Schedule of disaggregated revenue

As discussed in Note 2, revenues are recognized under guidance within ASC 606. The following table presents our disaggregated revenue for the periods presented (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
JAKAFI revenues, net	$	547,373	$	487,783	$	1,542,138	$	1,420,968
ICLUSIG revenues, net		28,522		26,380		82,356		76,426
PEMAZYRE revenues, net		17,562		8,089		48,924		11,875
MINJUVI revenues, net		556		—		556		—
Total product revenues, net		594,013		522,252		1,673,974		1,509,269
JAKAVI product royalty revenues		94,655		68,306		242,295		190,856
OLUMIANT product royalty revenues		86,572		28,647		154,875		79,924
TABRECTA product royalty revenues		2,747		1,438		7,270		2,144
Total 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

Fair value of financial instruments (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value of Financial Instruments

Schedule of fair value of assets measured on recurring basis

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)		September 30, 2021
Cash and cash equivalents	$	1,999,021	$	—	$	—	$	1,999,021
Debt securities (government)		—		285,054		—		285,054
Long term investments (Note 9)		192,096		—		—		192,096
Total assets	$	2,191,117	$	285,054	$	—	$	2,476,171


	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)		December 31, 2020
Cash and cash equivalents	$	1,513,008	$	—	$	—	$	1,513,008
Debt securities (government)		—		288,369		—		288,369
Long term investments (Note 9)		222,301		—		—		222,301
Total assets	$	1,735,309	$	288,369	$	—	$	2,023,678

Schedule of fair value of liabilities measured on recurring basis

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		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		September 30, 2021
Acquisition-related contingent consideration	$	—	$	—	$	252,000	$	252,000
Total liabilities	$	—	$	—	$	252,000	$	252,000


	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2020
Acquisition-related contingent consideration	$	—	$	—	$	266,000	$	266,000
Total liabilities	$	—	$	—	$	266,000	$	266,000

Schedule of roll forward of Level 3 liabilities

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


	2021
Balance at January 1,	$	266,000
Contingent consideration earned during the period but not yet paid		(9,910)
Payments made during the period		(17,158)
Change in fair value of contingent consideration		13,068
Balance at September 30,	$	252,000

Summary of marketable securities portfolio

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


			Net		Net
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
September 30, 2021
Debt securities (government)	$	285,135	$	—	$	(81)	$	285,054

December 31, 2020
Debt securities (government)	$	288,199	$	170	$	—	$	288,369

Concentrations of Credit Risk and Current Expected Credit Losses (Tables)

9 Months Ended

Sep. 30, 2021

Concentrations of Credit Risk and Current Expected Credit Losses

Schedule of concentration of credit risk related to specialty pharmacy customers

number of these customers. The concentration of credit risk related to our JAKAFI and PEMAZYRE product revenues is as follows:


	Percentage of Total Net				Percentage of Total Net
	Product Revenues for the				Product Revenues for the
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Customer A	19	%	20	%	19	%	20	%
Customer B	11	%	13	%	12	%	13	%
Customer C	17	%	17	%	18	%	17	%
Customer D	9	%	10	%	10	%	11	%
Customer E	11	%	8	%	11	%	8	%

Inventory (Tables)

9 Months Ended

Sep. 30, 2021

Inventory

Schedule of inventory

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


	September 30,		December 31,
	2021		2020
Raw materials	$	1,275	$	1,275
Work-in-process		35,988		21,242
Finished goods		14,925		13,456
		52,188		35,973
Inventories-current		21,303		16,425
Inventories-noncurrent	$	30,885	$	19,548

Property and Equipment, net (Tables)

9 Months Ended

Sep. 30, 2021

Property and Equipment, net

Schedule of property and equipment, net

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


	September 30,		December 31,
	2021		2020
Office equipment	$	18,395	$	17,880
Manufacturing and laboratory equipment		103,502		86,021
Computer equipment		75,105		66,640
Land		10,379		10,671
Building and leasehold improvements		277,901		238,042
Operating lease right-of-use assets		25,544		26,816
Construction in progress		343,686		257,929
		854,512		703,999
Less accumulated depreciation and amortization		(167,794)		(144,374)
Property and equipment, net	$	686,718	$	559,625

Summary of lease liability


	September 30,		December 31,
	2021		2020
Current
Operating lease liabilities	$	9,849	$	12,674
Finance lease liabilities		2,400		2,284
Noncurrent
Operating lease liabilities		14,951		14,188
Finance lease liabilities		31,376		32,573
Total lease liabilities	$	58,576	$	61,719

Intangible Assets and Goodwill (Tables)

9 Months Ended

Sep. 30, 2021

Intangible Assets and Goodwill

Schedule of finite-lived intangible assets, net

The components of intangible assets were as follows (in thousands, except for useful life):

Balance at September 30, 2021

Balance at December 31, 2020

Weighted-

Gross

Net

Gross

Net

Average Useful

Carrying

Accumulated

Carrying

Accumulated

Carrying

Lives (Years)

Amount

Amortization

Amount

Amortization

Amount

Finite-lived intangible assets:

Licensed IP

12.5

271,000

114,861

156,139

271,000

98,709

172,291

Schedule of estimated aggregate amortization expense

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets is as follows (in thousands):


		Remainder of
		2021		2022		2023		2024		2025		Thereafter
Amortization expense	$	5,385	$	21,536	$	21,536	$	21,536	$	21,536	$	64,610

Stock compensation (Tables)

9 Months Ended

Sep. 30, 2021

Stock Compensation

Schedule of valuation assumptions used for valuation of fair value of stock compensation granted

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 Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,								September 30,
	2021		2020		2021		2020		2021		2020		2021		2020
Average risk-free interest rates	0.76	%	0.28	%	0.60	%	0.85	%	0.28	%	0.13	%	0.22	%	0.17	%
Average expected life (in years)	5.16		5.15		5.00		4.96		0.50		0.50		0.50		0.50
Volatility	38	%	39	%	39	%	40	%	25	%	38	%	31	%	46	%
Weighted-average fair value (in dollars)	28.84		36.73		29.32		32.79		18.20		22.83		18.82		19.07

Schedule of option activity under the 2010 Stock Plan

Option activity under our 2010 Amended and Restated Stock Incentive Plan (the “2010 Stock Plan”) was as follows:


	Shares Subject to
	Outstanding Options
		Weighted Average
	Shares	Exercise Price
Balance at December 31, 2020	12,115,288	$	88.31
Options granted	2,419,885	$	85.80
Options exercised	(555,102)	$	67.63
Options cancelled	(855,329)	$	91.81
Balance at September 30, 2021	13,124,742	$	88.49

Schedule of RSU award and PSU activity under the 2010 Stock Plan

Restricted stock unit (“RSU”) and performance share (“PSU”) award activity under the 2010 Stock Plan was as follows:


	Shares Subject to
	Outstanding Awards
	Shares	Grant Date Value
Balance at December 31, 2020	3,284,583	$	87.42
RSUs granted	1,764,067	$	85.12
PSUs granted	107,088	$	83.58
RSUs released	(830,436)	$	87.89
PSUs released	(200,353)	$	68.08
RSUs cancelled	(324,075)	$	90.23
PSUs cancelled	(166,727)	$	72.60
Balance at September 30, 2021	3,634,147	$	87.07

Summary of shares available for grant

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


		Shares Available
		for Grant
Balance at December 31, 2020		5,515,182
Additional authorization		9,500,000
Options, RSUs and PSUs granted		(6,162,583)
Options, RSUs and PSUs cancelled		1,567,041
Balance at September 30, 2021		10,419,640

Accrued and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Accrued and Other Current Liabilities

Schedule of accrued and other current liabilities

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


	September 30,		December 31,
	2021		2020
Royalties	$	142,446	$	106,011
Clinical related costs		125,290		115,897
Sales allowances		105,749		73,204
Construction in progress		23,892		22,807
Operating lease liabilities		9,849		12,674
Other current liabilities		74,653		47,811
Total accrued and other current liabilities	$	481,879	$	378,404

Employee Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2021

Employee Benefit Plans

Schedule of net periodic benefit cost

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Service cost	$	1,975	$	1,523	$	5,927	$	4,457
Interest cost		23		49		68		142
Expected return on plan assets		(15)		(32)		(45)		(93)
Amortization of prior service cost		54		54		162		161
Amortization of actuarial losses		288		166		864		500
Net periodic benefit cost	$	2,325	$	1,760	$	6,976	$	5,167

Net Income (Loss) Per Share (Tables)

9 Months Ended

Sep. 30, 2021

Net Income (Loss) Per Share

Schedule of calculation of net income (loss) per share

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share data)	2021		2020		2021		2020
Basic Net Income (Loss) Per Share
Basic net income (loss)	$	181,739	$	(15,203)	$	384,730	$	(445,547)
Weighted average common shares outstanding		220,845		218,784		220,243		217,684

Basic net income (loss) per share	$	0.82	$	(0.07)	$	1.75	$	(2.05)

Diluted Net Income (Loss) Per Share
Diluted net income (loss)	$	181,739	$	(15,203)	$	384,730	$	(445,547)
Weighted average common shares outstanding		220,845		218,784		220,243		217,684

Dilutive stock options and awards		1,403		—		1,870		—

Weighted average shares used to compute diluted net income (loss) per share		222,248		218,784		222,113		217,684

Diluted net income (loss) per share	$	0.82	$	(0.07)	$	1.73	$	(2.05)

Schedule of antidilutive securities excluded from the computation of earnings per share

The potential common shares that were excluded from the diluted net income (loss) per share computation are as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2021	2020	2021	2020
Outstanding stock options and awards	11,841,440	15,447,389	9,917,824	15,447,389
Common shares issuable upon conversion of the 1.25% Convertible Senior Notes due 2020	—	231,339	—	231,339
Total potential common shares excluded from diluted net income (loss) per share computation	11,841,440	15,678,728	9,917,824	15,678,728

Organization and business (Details)	9 Months Ended
Organization and business (Details)	Sep. 30, 2021 segment
Organization and Business
Number of operating segments	1

Summary of significant accounting policies (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($) item	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) item	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Accounts Receivable
Allowance for doubtful accounts	$ 0.0		$ 0.0		$ 0.0
Inventory
Shelf life for finished goods inventory, maximum			36 months
Variable Interest Entities
Number of entities in which variable interest held \| item	0		0
Percentage of MediCare Part D Insurance Coverage Gap Required to be Funded by Manufacturers			70.00%
Medicare Part D Insurance Coverage Gap, Increase in Eligible Patient Spending, Percentage				30.00%
Advertising Expenses
Advertising expenses	$ 13.7	$ 6.4	$ 32.0	$ 16.5
MorphoSys AG
Variable Interest Entities
Collaboration Agreement Profit Loss Sharing Ratio			50.00%	50.00%
ICLUSIG
Variable Interest Entities
Amortization period			12 years 6 months

Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Revenues (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenues
Total revenues	$ 812,987	$ 620,643	$ 2,123,414	$ 1,877,193
Product revenues, net
Revenues
Total revenues	594,013	522,252	1,673,974	1,509,269
JAKAFI
Revenues
Total revenues	547,373	487,783	1,542,138	1,420,968
ICLUSIG
Revenues
Total revenues	28,522	26,380	82,356	76,426
PEMAZYRE
Revenues
Total revenues	17,562	8,089	48,924	11,875
MINJUVI
Revenues
Total revenues	556		556
Product royalty revenues
Revenues
Total revenues	183,974	98,391	404,440	272,924
JAKAVI Royalty Revenues
Revenues
Total revenues	94,655	68,306	242,295	190,856
OLUMIANT Royalty Revenues
Revenues
Total revenues	86,572	28,647	154,875	79,924
TABRECTA Royalty Revenues
Revenues
Total revenues	2,747	$ 1,438	7,270	2,144
Milestone and contract revenues
Revenues
Total revenues	$ 35,000		$ 45,000	$ 95,000

Fair Value of Financial Instruments - Fair value on a recurring basis (Details) $ in Thousands		9 Months Ended	12 Months Ended
	Jun. 01, 2016	Sep. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)
Fair value of financial instruments
Long term investments (Note 6)		$ 192,096	$ 222,301
ARIAD \| Contingent Consideration
Roll forward of Level 3 liabilities
Projected cash flows period	18 years
ARIAD \| Discount rate \| Contingent Consideration
Roll forward of Level 3 liabilities
Valuation input (as a percent)	10
ARIAD \| Average Cost of Capital \| Contingent Consideration
Roll forward of Level 3 liabilities
Valuation input (as a percent)		10
ARIAD \| Accrued and other current liabilities
Roll forward of Level 3 liabilities
Contingent consideration earned during the period but not yet paid		$ (9,900)	(9,600)
Level 3 \| Fair Value
Roll forward of Level 3 liabilities
Balance at the beginning of the period		266,000
Contingent consideration earned during the period but not yet paid		(9,910)
Payments made during the period		(17,158)
Change in fair value of contingent consideration		13,068
Balance at the end of the period		252,000	266,000
Recurring \| Fair Value
Fair value of financial instruments
Cash and cash equivalents		1,999,021	1,513,008
Debt securities (government)		285,054	288,369
Long term investments (Note 6)		192,096	222,301
Total assets		2,476,171	2,023,678
Acquisition-related contingent consideration		252,000	266,000
Total liabilities		252,000	266,000
Recurring \| Level 1
Fair value of financial instruments
Cash and cash equivalents		1,999,021	1,513,008
Long term investments (Note 6)		192,096	222,301
Total assets		2,191,117	1,735,309
Recurring \| Level 2
Fair value of financial instruments
Debt securities (government)		285,054	288,369
Total assets		285,054	288,369
Recurring \| Level 3
Fair value of financial instruments
Acquisition-related contingent consideration		252,000	266,000
Total liabilities		$ 252,000	$ 266,000

Fair Value of Financial Instruments - Marketable securities portfolio (Details) - Debt securities (government) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Summary of marketable security portfolio
Amortized Cost	$ 285,135	$ 288,199
Net Unrealized Gains		170
Net Unrealized Losses	(81)
Estimated Fair Value	$ 285,054	$ 288,369
Minimum
Summary of marketable security portfolio
Contractual maturity dates	12 months
Maximum
Summary of marketable security portfolio
Contractual maturity dates	18 months

Concentrations of Credit Risk and Current Expected Credit Losses (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Net Product Revenues \| Customer Concentration Risk \| Customer A
Concentration of risk
Percentage of concentration risk	19.00%	20.00%	19.00%	20.00%
Net Product Revenues \| Customer Concentration Risk \| Customer B
Concentration of risk
Percentage of concentration risk	11.00%	13.00%	12.00%	13.00%
Net Product Revenues \| Customer Concentration Risk \| Customer C
Concentration of risk
Percentage of concentration risk	17.00%	17.00%	18.00%	17.00%
Net Product Revenues \| Customer Concentration Risk \| Customer D
Concentration of risk
Percentage of concentration risk	9.00%	10.00%	10.00%	11.00%
Net Product Revenues \| Customer Concentration Risk \| Customer E
Concentration of risk
Percentage of concentration risk	11.00%	8.00%	11.00%	8.00%
Accounts Receivable \| Credit Concentration Risk \| Collaboration Partner A, B, C and D
Concentration of risk
Percentage of concentration risk			37.00%		42.00%
Accounts Receivable \| Credit Concentration Risk \| Customer A, B, C D, and E
Concentration of risk
Percentage of concentration risk			32.00%		33.00%

Inventory (Details) - USD ($) $ in Thousands	9 Months Ended
Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Raw materials	$ 1,275	$ 1,275
Work-in-process	35,988	21,242
Finished goods	14,925	13,456
Total inventories	52,188	35,973
Inventories - current	21,303	16,425
Inventories-noncurrent	30,885	$ 19,548
Inventory incurred prior to FDA approval	$ 72,100
Minimum
Period of lower average per unit cost of materials	3 months
Maximum
Period of lower average per unit cost of materials	36 months

Property and Equipment, net - Property and equipment, net (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Property and equipment, net
Property and Equipment, gross	$ 854,512	$ 703,999
Less accumulated depreciation and amortization	(167,794)	(144,374)
Property and Equipment, net	686,718	559,625
Office equipment
Property and equipment, net
Property and Equipment, gross	18,395	17,880
Laboratory equipment
Property and equipment, net
Property and Equipment, gross	103,502	86,021
Computer equipment
Property and equipment, net
Property and Equipment, gross	75,105	66,640
Land
Property and equipment, net
Property and Equipment, gross	10,379	10,671
Building and leasehold improvements
Property and equipment, net
Property and Equipment, gross	277,901	238,042
Operating lease right-of-use assets
Property and equipment, net
Property and Equipment, gross	25,544	26,816
Construction in Progress
Property and equipment, net
Property and Equipment, gross	$ 343,686	$ 257,929

Property and Equipment, net - Buildings and construction (Details) $ in Thousands	1 Months Ended
	Jul. 31, 2018 USD ($)	Feb. 28, 2018 ft²	Sep. 30, 2021 USD ($) ft²	Dec. 31, 2020 USD ($)	Jun. 30, 2019 USD ($)
Property and equipment, net
Finance lease right-of-use assets, net			$ 27,133	$ 28,451
Costs for architectural and engineering studies and initial ground preparation			$ 854,512	$ 703,999
Office Building in Wilmington, Delaware
Property and equipment, net
Square footage \| ft²			200,000
Capitalized construction costs			$ 140,700
Office Building in Morges, Switzerland
Property and equipment, net
Initial lease term		15 years
Options to extend		true
Renewal term of agreement to rent		20 years
Square footage \| ft²		100,000
Financing lease liabilities					$ 31,100
Finance lease right-of-use assets, net					29,100
Finance Lease, Lease Incentive Receivable					$ 2,000
Capitalized construction costs			19,100
Land in Y-PARC, Switzerland's largest technology park, Yverdon
Property and equipment, net
Purchase price	$ 4,800
Costs for architectural and engineering studies and initial ground preparation			$ 186,700

Property and Equipment, net - Lease and maturity of lease liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Lease liabilities
Lessee, Operating Lease, Existence of Residual Value Guarantee [true false]			false
Lessee, Operating Lease, Existence of Option to Extend [true false]			true
Operating lease liabilities, current	$ 9,849		$ 9,849		$ 12,674
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accrued Liabilities, Current		Accrued Liabilities, Current		Accrued Liabilities, Current
Finance lease liabilities, current	$ 2,400		$ 2,400		$ 2,284
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	Finance lease liabilities, current		Finance lease liabilities, current		Finance lease liabilities, current
Operating lease liabilities, noncurrent	$ 14,951		$ 14,951		$ 14,188
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other Liabilities, Noncurrent		Other Liabilities, Noncurrent		Other Liabilities, Noncurrent
Finance lease liabilities, noncurrent	$ 31,376		$ 31,376		$ 32,573
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Finance lease liabilities, noncurrent		Finance lease liabilities, noncurrent		Finance lease liabilities, noncurrent
Total lease liabilities	$ 58,576		$ 58,576		$ 61,719
Cash paid for operating lease liabilities			11,400	$ 8,700
Cash paid for financing lease liabilities in financing cash flows			$ 1,788	619
Maturity of our finance lease liabilities
Weighted average lease term, finance leases	13 years 7 months 6 days		13 years 7 months 6 days
Weighted average lease term, operating leases	4 years 8 months 12 days		4 years 8 months 12 days
Weighted average discount rate, finance leases	4.10%		4.10%
Weighted average discount rate, operating leases	8.80%		8.80%
Expense related to our operating leases	$ 3,500	$ 2,900	$ 10,700	9,000
Amortization on our finance lease right-of-use assets	700	700	2,000	1,900
Interest expense on finance lease liabilities	$ 400	$ 300	$ 1,000	$ 900

Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Amortization Expense
Remainder of 2021	$ 5,385
2022	21,536
2023	21,536
2024	21,536
2025	21,536
Thereafter	64,610
Changes to carrying amount of goodwill
Changes to the carry amount of goodwill	$ 0
Licensed IP
Intangible assets
Weighted Average Useful Lives (Years)	12 years 6 months
Finite-lived intangible assets:
Gross Carrying Amount	$ 271,000	$ 271,000
Accumulated Amortization	114,861	98,709
Net Carrying Amount	$ 156,139	$ 172,291

License Agreements - Novartis (Details) - USD ($) $ in Thousands	1 Months Ended							3 Months Ended		9 Months Ended		143 Months Ended
	Jun. 30, 2020	May 31, 2020	Apr. 30, 2016	Sep. 30, 2014	Jan. 31, 2010	Dec. 31, 2009	Nov. 30, 2009	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Dec. 31, 2020
License agreements
Revenues								$ 812,987	$ 620,643	$ 2,123,414	$ 1,877,193
JAKAFI
License agreements
Revenues								547,373	487,783	1,542,138	1,420,968
Novartis
License agreements
Upfront and immediate milestone payment to be received under license agreement							$ 210,000
Upfront payment received under license agreement						$ 150,000
Immediate milestone payment received under license agreement					$ 60,000
Revenues									0		90,000
Royalties payable								132,400		132,400		$ 132,400	$ 96,400
Reimbursable costs included in accounts receivable								200		200		200	$ 200
Research and development expenses reimbursed								0	0	100	300
Novartis \| Pre-specified Events \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement							1,200,000
Novartis \| Development Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone												157,000
Novartis \| Development Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement							174,000
Novartis \| Regulatory Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone												280,000
Novartis \| Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement							495,000
Novartis \| Sales and Commercial Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone												$ 200,000
Novartis \| Sales and Commercial Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement							$ 500,000
Novartis \| TABRECTA
License agreements
Revenues								2,700	1,400	7,300	2,100
Novartis \| TABRECTA \| Development Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone		$ 25,000
Novartis \| TABRECTA \| Regulatory Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone		$ 45,000
Novartis \| TABRECTA \| Regulatory Milestones \| JAPAN
License agreements
Amount recognized and received for the achievement of a predefined milestone	$ 20,000
Novartis \| GVHD \| Development and Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			$ 75,000
Novartis \| JAKAFI \| U.S.
License agreements
Royalties payable on net sales								26,900	23,900	70,600	64,600
Novartis \| JAKAVI
License agreements
Revenues								$ 94,700	$ 68,300	$ 242,300	$ 190,900
Novartis \| JAKAVI \| Minimum
License agreements
Royalty payments on future global net sales (as a percent)										12.00%
Novartis \| JAKAVI \| Maximum
License agreements
Royalty payments on future global net sales (as a percent)										14.00%
Novartis \| JAKAVI \| Regulatory Milestones \| Europe
License agreements
Amount recognized and received for the achievement of a predefined milestone				$ 60,000

License Agreements - Lilly (Details) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended		9 Months Ended		142 Months Ended
	May 31, 2019	Mar. 31, 2016	Dec. 31, 2009	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021
License agreements
Research and Development Expense				$ 334,945	$ 438,109	$ 985,352	$ 1,809,997
Revenues				812,987	620,643	2,123,414	1,877,193
Product royalty revenues
License agreements
Revenues				183,974	98,391	$ 404,440	272,924
Eli Lilly
License agreements
Upfront payment received under license agreement			$ 90,000
Eli Lilly \| Phase IIB
License agreements
Associated future global development costs from the initiation of a Phase IIb trial, if elected to co-develop (as a percentage)						30.00%
Associated future royalty payments from the initiation of a Phase IIb trial, if elected to not co-develop, percentage						20.00%
Eli Lilly \| Pre-specified Events \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			665,000
Eli Lilly \| Development Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone								$ 149,000
Eli Lilly \| Development Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			150,000
Eli Lilly \| Regulatory Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone								$ 265,000
Eli Lilly \| Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			365,000
Eli Lilly \| Sales and Commercial Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			$ 150,000
Eli Lilly \| Product royalty revenues
License agreements
Revenues				$ 86,600	$ 28,600	$ 154,900	$ 79,900
Eli Lilly \| GVHD
License agreements
Upfront payment under license agreement		$ 35,000
Additional milestone payments under the license agreement		$ 40,000
Eli Lilly \| GVHD \| Regulatory Milestones
License agreements
Milestone payment made under license agreement	$ 20,000

License Agreements - Agenus (Details) $ / shares in Units, $ in Thousands, shares in Millions			1 Months Ended			3 Months Ended					9 Months Ended		12 Months Ended
	Feb. 14, 2017 USD ($) $ / shares	Feb. 01, 2017 USD ($) $ / shares shares	Feb. 28, 2017 USD ($)	Nov. 30, 2015 item	Jan. 31, 2015 USD ($) item	Sep. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2021 USD ($) $ / shares shares	Mar. 31, 2021 USD ($) $ / shares shares	Sep. 30, 2020 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) $ / shares	Sep. 30, 2020 USD ($) $ / shares	Dec. 31, 2017 USD ($)	Dec. 31, 2020 USD ($)
License agreements
Long term investments						$ 192,096					$ 192,096			$ 222,301
Unrealized gain (loss) on long term investments						(27,450)			$ (13,207)		(28,394)	$ 10,935
Research and development expense						334,945			$ 438,109		$ 985,352	1,809,997
Agenus
License agreements
Number of program targets \| item				3	4
Royalty payments on future global net sales (as a percent)											15.00%
Upfront payment under license agreement					$ 60,000
Period of notice for termination of license agreement			12 months
Agenus \| Development, Regulatory and Commercialization Milestones \| Minimum
License agreements
Royalty payments on future global net sales (as a percent)											6.00%
Agenus \| Development, Regulatory and Commercialization Milestones \| Maximum
License agreements
Royalty payments on future global net sales (as a percent)											12.00%
Additional milestone payments under the license agreement			$ 500,000
Agenus \| Development Milestones
License agreements
Upfront payment under license agreement													$ 20,000
Additional milestone payments under the license agreement								$ 10,000
Agenus
License agreements
Long term investments						$ 63,400					$ 63,400			44,700
Ownership percentage (as a percent)	18.00%					5.00%					5.00%
Shares divested (in shares) \| shares						0.2	1.6	0.2	2.5	1.2
Share price (per share) \| $ / shares								$ 5.45
Gross proceeds from sale of stock						$ 1,100	$ 8,200	$ 1,100	$ 12,700	$ 4,500
Unrealized gain (loss) on long term investments						(2,800)			3,900		$ 29,100	(1,200)
Research and development expense						200			$ 100		900	$ 400
Agenus \| Accrued and other liabilities
License agreements
Accrued and other liabilities						$ 800					$ 800			$ 500
Agenus \| Minimum
License agreements
Share price (per share) \| $ / shares						$ 5.74	$ 4.59		$ 4.28	$ 3.57	$ 5.74	$ 4.28
Agenus \| Maximum
License agreements
Share price (per share) \| $ / shares						$ 6.75	$ 5.41		$ 5.25	$ 4.21	$ 6.75	$ 5.25
Agenus \| Stock purchase agreement
License agreements
Total consideration paid	$ 60,000
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares		10.0
Purchase price of common stock		$ 60,000
Per share price \| $ / shares	$ 4.40	$ 6.00
Discount for lack of marketability	$ 4,500
Fair value of shares on the issuance date	$ 39,500
Long term investments													39,500
Research and development expense													$ 20,500

License Agreements - Merus (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended				3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 23, 2017	Jan. 31, 2021	Feb. 28, 2017	Jan. 31, 2017	Dec. 31, 2016	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2017	Dec. 31, 2020
License agreements
Long term investments						$ 192,096		$ 192,096			$ 222,301
Research and development expense						334,945	$ 438,109	985,352	$ 1,809,997
Unrealized gain (loss) on long term investments						(27,450)	(13,207)	(28,394)	10,935
Total revenues						812,987	620,643	2,123,414	1,877,193
Net income (loss)								384,730	(445,547)
Current assets						2,923,797		2,923,797			2,359,894
Current liabilities						742,712		742,712			631,195
Merus
License agreements
Associated future global development costs , if elected to co-develop (as a percent)				35.00%
Upfront payment under license agreement			$ 120,000
Research and development expense						3,100	1,800	10,900	6,000
Merus \| Accrued and other liabilities
License agreements
Accrued and other liabilities						1,600		1,600			1,600
Merus \| U.S.
License agreements
Profit sharing (as a percent)				50.00%
Percentage of profit (losses)				50.00%
Merus \| Minimum
License agreements
Royalty payments on future global net sales (as a percent)				6.00%
Merus \| Minimum \| U.S.
License agreements
Royalty payments on future global net sales (as a percent)				6.00%
Merus \| Minimum \| Non-U.S.
License agreements
Royalty payments on future global net sales (as a percent)				6.00%
Merus \| Maximum
License agreements
Royalty payments on future global net sales (as a percent)				10.00%
Percentage of reverse royalty				4.00%
Merus \| Maximum \| U.S.
License agreements
Royalty payments on future global net sales (as a percent)				10.00%
Percentage of additional royalties				4.00%
Merus \| Maximum \| Non-U.S.
License agreements
Royalty payments on future global net sales (as a percent)				10.00%
Merus \| Maximum \| Development and Regulatory Milestones
License agreements
Additional milestone payments under the license agreement				$ 100,000
Merus \| Maximum \| Sales and Commercial Milestones
License agreements
Additional milestone payments under the license agreement				$ 250,000
Merus
License agreements
Per share price of common stock	$ 24.50
Discount for lack of marketability	$ 5,600
Fair value of shares on the issuance date	72,800
Total consideration paid	80,000
Long term investments	$ 72,800
Research and development expense										$ 7,200
Fair market value of our long term investments						$ 78,100		$ 78,100			$ 56,100
Ownership percentage (as a percent)						9.00%		9.00%
Unrealized gain (loss) on long term investments						$ 3,300	$ (13,100)	$ 13,300	$ (6,700)
Merus \| IPO
License agreements
Common shares purchased (in shares)		350,000
Number of shares in underwritten public offering (in shares)		4,848,485
Per share price		$ 24.75
Value of shares acquired		$ 8,700
Merus \| Stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares )					3,200,000
Purchase price of common stock					$ 80,000
Per share price					$ 25.00

License Agreements - Calithera (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions		1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 30, 2017	Jan. 31, 2017	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2017	Dec. 31, 2020	Jan. 01, 2017
License agreements
Long term investments			$ 192,096		$ 192,096			$ 222,301
Research and development expense			334,945	$ 438,109	985,352	$ 1,809,997
Unrealized gain (loss) on long term investments			(27,450)	(13,207)	(28,394)	10,935
Calithera
License agreements
Funding of future development costs (as a percent)		70.00%
Upfront payment made under license agreement		$ 45,000
Potential milestone payments to be made with profit sharing terminated		$ 720,000
Milestone payment made under license agreement					12,000
Research and development expense			300	2,000	4,800	6,400
Calithera \| Accrued and other liabilities
License agreements
Accrued and other liabilities			0		0
Calithera \| U.S.
License agreements
Percentage of profit (losses)		60.00%
Calithera
License agreements
Total consideration paid	$ 53,000	$ 53,000
Long term investments			$ 3,800		$ 3,800			8,400
Ownership percentage (as a percent)			2.00%		2.00%
Calithera \| Other Comprehensive Income
License agreements
Unrealized gain (loss) on long term investments			$ 200	$ (3,200)	$ (4,600)	$ (3,900)
Calithera \| Calithera \| Accrued and other liabilities
License agreements
Accrued and other liabilities								$ 600
Calithera \| Stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares )		1.7
Purchase price of common stock									$ 8,000
Per share price	$ 6.75								$ 4.65
Fair market value of our long term investments	$ 11,600
Stock purchase price		$ 8,000
Long term investments							$ 11,600
Research and development expense							$ 41,400
Calithera \| Collaboration and license agreement
License agreements
Upfront license fees		$ 45,000

License Agreements - MacroGenics (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Oct. 31, 2017	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2017
License agreements
Research and development		$ 334,945	$ 438,109	$ 985,352	$ 1,809,997
MacroGenics
License agreements
Upfront payment under license agreement	$ 150,000
Research and development		17,800	$ 10,600	49,000	$ 43,300
MacroGenics \| Accrued and other liabilities
License agreements
Accrued and other liabilities		$ 0		0		$ 100
Minimum \| MacroGenics
License agreements
Royalty payments on future global net sales (as a percent)	15.00%
Maximum \| MacroGenics
License agreements
Royalty payments on future global net sales (as a percent)	24.00%
Development and Regulatory Milestones \| MacroGenics
License agreements
Milestone payment made under license agreement				$ 70,000
Development and Regulatory Milestones \| Maximum \| MacroGenics
License agreements
Additional milestone payments under the license agreement	$ 350,000
Sales and Commercial Milestones \| Maximum \| MacroGenics
License agreements
Additional milestone payments under the license agreement							$ 330,000

License Agreements - Syros (Details) $ / shares in Units, $ in Thousands, shares in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Jan. 31, 2018 USD ($) item $ / shares shares	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)	Feb. 28, 2018 USD ($)	Jan. 08, 2018 $ / shares
License agreements
Long term investments		$ 192,096		$ 192,096		$ 222,301
Research and development expense		334,945	$ 438,109	985,352	$ 1,809,997
Unrealized gain (loss) on long term investments		(27,450)	(13,207)	(28,394)	10,935
Syros Pharmaceuticals, Inc.
License agreements
Number of program targets \| item	7
Long term investments		$ 4,200		$ 4,200		$ 10,200
Ownership percentage (as a percent)		2.00%		2.00%
Unrealized gain (loss) on long term investments		$ (900)	$ (1,700)	$ (6,000)	$ 1,800
Syros Pharmaceuticals, Inc. \| Stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares	0.8
Purchase price of common stock	$ 10,000
Per share price \| $ / shares	$ 12.61							$ 9.77
Lock-up period	12 months
Discount for lack of marketability	$ 100
Fair value of shares on the issuance date	7,600
Long term investments	7,600
Research and development expense	$ 2,400
Syros Pharmaceuticals, Inc. \| Amended stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares	0.1
Purchase price of common stock	$ 1,400
Per share price \| $ / shares	$ 9.55
Long term investments							$ 1,400
Syros Pharmaceuticals, Inc. \| Maximum
License agreements
Target selection and option exercise fee payment	$ 54,000
Syros Pharmaceuticals, Inc. \| Development and Regulatory Milestones \| Maximum
License agreements
Additional milestone payments under the license agreement	50,000
Syros Pharmaceuticals, Inc. \| Sales and Commercial Milestones \| Maximum
License agreements
Additional milestone payments under the license agreement	$ 65,000

License Agreements - Innovent (Details) - Innovent - USD ($) $ in Millions	1 Months Ended				3 Months Ended		9 Months Ended
	Jun. 30, 2021	Apr. 30, 2020	Jan. 31, 2019	Dec. 31, 2018	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
License agreements
Upfront and immediate milestone payment to be received under license agreement			$ 40.0
Research and development expenses reimbursed					$ 0.0	$ 1.7	$ 2.3	$ 4.3
Reimbursable costs included in accounts receivable					$ 2.4		$ 2.4		$ 1.2
Regulatory Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone	$ 10.0
Regulatory Milestones \| PEMAZYRE
License agreements
Amount recognized and received for the achievement of a predefined milestone		$ 5.0
Development and Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement				$ 94.0
Sales and Commercial Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement				$ 202.5

License Agreements - Zai Lab (Details) - Zai Lab Ltd - USD ($) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 31, 2019	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Upfront and immediate milestone payment to be received under license agreement	$ 17.5
Research and development expenses reimbursed		$ 3.2	$ 0.0	$ 3.2	$ 0.2
Reimbursable costs included in accounts receivable		$ 0.8		$ 0.8		$ 0.6
Development and Regulatory Milestones \| Maximum
Upfront payment under license agreement	22.5
Sales and Commercial Milestones \| Maximum
Upfront payment under license agreement	$ 37.5

License Agreements - MorphoSys (Details) $ / shares in Units, $ in Thousands, € in Millions		1 Months Ended		3 Months Ended		9 Months Ended
	Mar. 03, 2020 USD ($) $ / shares	Mar. 31, 2020 EUR (€)	Jan. 31, 2020 USD ($) $ / shares	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Long term investments				$ 192,096		$ 192,096		$ 222,301
Research and development expense				334,945	$ 438,109	985,352	$ 1,809,997
Unrealized gain (loss) on long term investments				(27,450)	(13,207)	(28,394)	10,935
Collaboration loss sharing				9,149	14,989	29,476	30,372
ADSs
Equity Method Investment, Ownership Percentage			25.00%
Equity Method Investment, Aggregate Cost			$ 150,000
Per share price \| $ / shares	$ 27.65		$ 41.33
Lock-up period			18 months
Discount for lack of marketability	$ 4,900
Fair value of shares	95,500
Long term investments	95,500			$ 42,700		$ 42,700		102,900
Research and development expense	$ 54,500
MorphoSys AG
Upfront payment under license agreement \| €		€ 750.0
Equity Method Investment, Ownership Percentage				3.00%		3.00%
Research and development expense				$ 21,500	23,800	$ 55,800	51,100
Unrealized gain (loss) on long term investments				(27,300)	900	$ (60,200)	$ 18,500
Profit (loss) sharing ratio						50.00%	50.00%
Collaboration loss sharing				9,100	$ 15,000	$ 29,500	$ 30,400
Associated future global development costs from the initiation of a Phase IIb trial, if elected to co-develop (as a percentage)						55.00%	55.00%
Accrued and other liabilities				$ 52,300		$ 52,300		$ 54,200
MorphoSys AG \| Development and Regulatory Milestones \| Maximum
Additional milestone payments under the license agreement			$ 740,000
MorphoSys AG \| Sales and Commercial Milestones \| Maximum
Additional milestone payments under the license agreement			$ 315,000
MorphoSys AG \| MorphoSys AG
Funding of future development costs (as a percent)						45.00%
MorphoSys AG \| Incyte
Funding of future development costs (as a percent)						55.00%

License Agreements - Nimble (Details) - Nimble - Maximum $ in Millions	Sep. 30, 2020 USD ($)
Future contingent discovery milestones
Additional milestone payments under the license agreement	$ 8.0
Development and Regulatory Milestones
Additional milestone payments under the license agreement	127.0
Sales and Commercial Milestones
Additional milestone payments under the license agreement	$ 130.0

License Agreements - InnoCare (Details) - InnoCare - tafasitamab $ in Millions	1 Months Ended
	Sep. 30, 2021 USD ($)
Upfront payment received under license agreement	$ 35.0
Development and Regulatory Milestones \| Maximum
Upfront and immediate milestone payment to be received under license agreement	45.0
Sales and Commercial Milestones \| Maximum
Upfront and immediate milestone payment to be received under license agreement	$ 37.5

License Agreements - Syndax (Details) $ / shares in Units, $ in Millions	1 Months Ended
	Sep. 30, 2021 USD ($) $ / shares shares
Investment in Syndax
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares	1,421,523
Equity Method Investment, Aggregate Cost	$ 35.0
Per share price \| $ / shares	$ 24.62
Lock-up period	6 months
Syndax
Upfront payment under license agreement	$ 117.0
Syndax \| Development and Regulatory Milestones \| Maximum
Additional milestone payments under the license agreement	220.0
Syndax \| Sales and Commercial Milestones \| Maximum
Additional milestone payments under the license agreement	$ 230.0
Syndax \| Syndax \| U.S.
Funding of future development costs (as a percent)	45.00%
Syndax \| Incyte \| U.S.
Funding of future development costs (as a percent)	55.00%

Stock Compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Stock compensation
Stock compensation expense	$ 42.7	$ 43.8	$ 134.8	$ 132.6
Stock Compensation Expense Capitalized	0.6	0.2	$ 1.8	0.5
Assumed annualized forfeiture rate (as a percent)			5.00%
Weighted-average fair value assumptions
Valuation method			Black-Scholes valuation model
Research and Development Expense
Stock compensation
Stock compensation expense	26.3	29.0	$ 84.2	90.2
Selling, General and Administrative Expenses
Stock compensation
Stock compensation expense	15.9	14.6	49.5	41.7
Cost of product revenues
Stock compensation
Stock compensation expense	$ 0.5	$ 0.2	$ 1.1	$ 0.7
Stock Options
Weighted-average fair value assumptions
Average risk-free interest rates (as a percent)	0.76%	0.28%	0.60%	0.85%
Average expected life (in years)	5 years 1 month 28 days	5 years 1 month 24 days	5 years	4 years 11 months 15 days
Volatility (as a percent)	38.00%	39.00%	39.00%	40.00%
Weighted-average fair value (in dollars per share)	$ 28.84	$ 36.73	$ 29.32	$ 32.79
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 77.3		$ 77.3
Vesting period of recognition of the unrecognized compensation cost of nonvested awards			1 year 3 months 18 days
Restricted Stock Units (RSUs)
Weighted-average fair value assumptions
Average risk-free interest rates (as a percent)	0.28%	0.13%	0.22%	0.17%
Average expected life (in years)	6 months	6 months	6 months	6 months
Volatility (as a percent)	25.00%	38.00%	31.00%	46.00%
Weighted-average fair value (in dollars per share)	$ 18.20	$ 22.83	$ 18.82	$ 19.07
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 172.3		$ 172.3
Vesting period of recognition of the unrecognized compensation cost of nonvested awards			2 years
Performance Stock Units (PSUs)
Stock compensation
Stock compensation expense	1.7	$ 2.7	$ 5.0	$ 11.4
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 19.2		$ 19.2
Vesting period of recognition of the unrecognized compensation cost of nonvested awards			1 year 7 months 6 days

Stock Compensation - Option activity (Details) - Stock Options - $ / shares	1 Months Ended	6 Months Ended	9 Months Ended
	Jul. 31, 2016	Jun. 30, 2016	Sep. 30, 2021
Shares Subject to Outstanding Options, Shares
Outstanding at the beginning of the period (in shares)			12,115,288
Options granted (in shares)			2,419,885
Options exercised (in shares)			(555,102)
Options cancelled (in shares)			(855,329)
Outstanding at the end of the period (in shares)			13,124,742
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)			$ 88.31
Options granted (in dollars per share)			85.80
Options exercised (in dollars per share)			67.63
Options cancelled (in dollars per share)			91.81
Outstanding at the end of the period (in dollars per share)			$ 88.49
Termination period	10 years	7 years
Vesting period	4 years	3 years
Tranche One
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Vesting period	1 year	1 year
Vesting Percentage	25.00%	33.00%
Tranche Two
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Vesting period	36 months	24 months

Stock Compensation - RSU and PSU award activity (Details) - $ / shares	1 Months Ended						9 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2019	Apr. 30, 2019	Jul. 31, 2018	Jun. 30, 2018	Sep. 30, 2021
Shares Subject to Outstanding Options, Shares
Outstanding at the beginning of the period (in shares)							3,284,583
Outstanding at the end of the period (in shares)							3,634,147
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)							$ 87.42
Outstanding at the end of the period (in dollars per share)							$ 87.07
Restricted Stock Units (RSUs)
Shares Subject to Outstanding Options, Shares
Granted (in shares)						190,000	1,764,067
Released (in shares)							(830,436)
Cancelled (in shares)							(324,075)
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Granted (in dollars per share)							$ 85.12
Released (in dollars per share)							87.89
Cancelled (in dollars per share)							$ 90.23
Performance Stock Units (PSUs)
Shares Subject to Outstanding Options, Shares
Granted (in shares)	107,088	92,347	86,975	100,000	77,243	446,500	107,088
Released (in shares)							(200,353)
Cancelled (in shares)							(166,727)
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Granted (in dollars per share)							$ 83.58
Released (in dollars per share)							68.08
Cancelled (in dollars per share)							$ 72.60

Stock Compensation - RSU and PSU Narrative (Details) - USD ($) $ in Millions	1 Months Ended								3 Months Ended		6 Months Ended	9 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2019	Apr. 30, 2019	Jul. 31, 2018	Jun. 30, 2018	Jul. 31, 2016	Jan. 31, 2014	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2016	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Stock Compensation Plans
Allocated Share-based Compensation Expense									$ 42.7	$ 43.8		$ 134.8	$ 132.6
Stock Options
Stock Compensation Plans
Vesting period							4 years				3 years
Stock Options \| Tranche One
Stock Compensation Plans
Percentage of units vesting at the end of each calendar year (as a percent)							25.00%				33.00%
Vesting period							1 year				1 year
Stock Options \| Tranche Two
Stock Compensation Plans
Vesting period							36 months				24 months
Restricted Stock Units (RSUs)
Stock Compensation Plans
Number of shares awarded for each RSU (in shares)								1
Percentage of units vesting at the end of each calendar year (as a percent)							25.00%
Vesting period							4 years
Granted (in shares)						190,000						1,764,067
Service period											3 years
Performance Stock Units (PSUs)
Stock Compensation Plans
Vesting period	3 years	3 years	4 years		4 years
Allocated Share-based Compensation Expense									$ 1.7	$ 2.7		$ 5.0	$ 11.4
Granted (in shares)	107,088	92,347	86,975	100,000	77,243	446,500						107,088
Multiplying factor														101.80%		83.00%
Performance Stock Units (PSUs) \| Minimum
Stock Compensation Plans
Vesting period						3 years
Performance Stock Units (PSUs) \| Maximum
Stock Compensation Plans
Vesting period						4 years
Multiplier conversion rate of units into common stock (as a percent)	150.00%	200.00%	125.00%		150.00%
Performance Stock Units (PSUs) \| Tranche One
Stock Compensation Plans
Granted (in shares)						106,500
Multiplying factor															142.00%
Performance Stock Units (PSUs) \| Tranche One \| Maximum
Stock Compensation Plans
Multiplying factor						267.00%
Performance Stock Units (PSUs) \| Tranche Two
Stock Compensation Plans
Granted (in shares)						150,000
Multiplying factor														100.00%
Performance Stock Units (PSUs) \| Tranche Two \| Minimum
Stock Compensation Plans
Multiplying factor						0.00%
Performance Stock Units (PSUs) \| Tranche Two \| Maximum
Stock Compensation Plans
Multiplying factor						100.00%
Performance Stock Units (PSUs) \| Tranche Three
Stock Compensation Plans
Granted (in shares)						290,000
Multiplying factor									50.00%			50.00%
Performance Stock Units (PSUs) \| Tranche Three \| Maximum
Stock Compensation Plans
Multiplying factor						100.00%

Stock Compensation - Shares available for grant (Details)	9 Months Ended
	Sep. 30, 2021 shares
Shares Available For Grant
Outstanding at the beginning of the period (in shares)	5,515,182
Additional authorization (in shares)	9,500,000
Options, RSUs and PSUs granted (in shares)	(6,162,583)
Options, RSUs and PSUs cancelled (in shares)	1,567,041
Outstanding at the end of the period (in shares)	10,419,640

Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Accrued and Other Current Liabilities
Royalties	$ 142,446	$ 106,011
Clinical related costs	125,290	115,897
Sales allowances	105,749	73,204
Construction in progress	23,892	22,807
Operating lease liabilities	9,849	12,674
Other current liabilities	74,653	47,811
Total accrued and other current liabilities	$ 481,879	$ 378,404

Employee Benefit Plans - Defined Contribution Plan (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Employee Benefit Plans
Defined contribution expense	$ 4.4	$ 3.5	$ 12.8	$ 10.1

Employee benefit plans - Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Employee Benefit Plans
Service cost	$ 1,975	$ 1,523	$ 5,927	$ 4,457
Interest cost	23	49	68	142
Expected return on plan assets	(15)	(32)	(45)	(93)
Amortization of prior service cost	54	54	162	161
Amortization of actuarial losses	288	166	864	500
Net periodic benefit cost	$ 2,325	$ 1,760	$ 6,976	$ 5,167
Location of costs excluding the service component	Other income (expense), net	Other income (expense), net	Other income (expense), net	Other income (expense), net
Expected contributions	$ 5,300		$ 5,300

Income taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Taxes
Income tax (benefit) expense	$ 27,730	$ 11,695	$ 65,694	$ 45,227
Increase in unrecognized tax benefits			7,300
Increase (decrease) noncurrent other liabilities			$ 5,400

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Basic Net Income (Loss) Per Share
Basic net income (loss) per share	$ 181,739	$ (15,203)	$ 384,730	$ (445,547)
Weighted average common shares outstanding	220,845,000	218,784,000	220,243,000	217,684,000
Basic net income (loss) per share	$ 0.82	$ (0.07)	$ 1.75	$ (2.05)
Diluted Net Income (Loss) Per Share
Diluted net income (loss)	$ 181,739	$ (15,203)	$ 384,730	$ (445,547)
Weighted average common shares outstanding	220,845,000	218,784,000	220,243,000	217,684,000
Dilutive stock options and awards	1,403,000		1,870,000
Weighted average shares used to compute diluted net income (loss) per share	222,248,000	218,784,000	222,113,000	217,684,000
Diluted net income (loss) per share	$ 0.82	$ (0.07)	$ 1.73	$ (2.05)
Anti-dilutive securities
Potential common shares excluded from diluted net income (loss) per share computation	11,841,440	15,678,728	9,917,824	15,678,728
Stock Options
Anti-dilutive securities
Potential common shares excluded from diluted net income (loss) per share computation	11,841,440	15,447,389	9,917,824	15,447,389
Convertible Senior Notes 1.25 Percent Due 2020
Anti-dilutive securities
Potential common shares excluded from diluted net income (loss) per share computation		231,339		231,339

Commitments and contingencies - Commitments (Details) - Credit Agreement $ in Millions	1 Months Ended
	Aug. 31, 2021 USD ($)	Sep. 30, 2021 USD ($)
Commitments
Aggregate Principal amount	$ 500.0
Increase in maximum revolving commitments	$ 250.0
Consolidated leverage ratio	0.25
Capitalized debt issuance costs		$ 1.3
Minimum
Commitments
Commitment fee (as a percent)	0.15%
Maximum
Commitments
Commitment fee (as a percent)	0.225%
Base Rate \| Minimum
Commitments
Interest rate margin (as a percent)	0.125%
Base Rate \| Maximum
Commitments
Interest rate margin (as a percent)	0.875%
Eurodollar Rate \| Minimum
Commitments
Interest rate margin (as a percent)	1.125%
Eurodollar Rate \| Maximum
Commitments
Interest rate margin (as a percent)	1.875%

Commitments and contingencies - Contingencies (Details) $ in Millions	9 Months Ended
	Sep. 30, 2021 USD ($)
US Department of Justice
Contingencies
Settlement amount	$ 12.6