View Filing Data

Marketable securities-available-for-sale

$ 928,517

$ 899,509

269,865

270,136

Accounts receivable

316,310

266,299

Inventory

5,869

6,482

Prepaid expenses and other current assets

77,523

62,428

Total current assets

1,598,084

1,504,854

Restricted cash and investments

1,000

925

Property and equipment, net

131,330

134,356

Inventory

6,701

7,966

267,586

259,763

Other intangible assets, net

226,132

236,901

Goodwill

155,593

Other assets, net

10,731

2,224

Accrued and other current liabilities

2,397,157

2,302,582

Current liabilities:

Accounts payable

75,559

67,671

Accrued compensation

41,704

74,550

Interest payable

213,888

198,901

Convertible senior notes

7,554

7,393

29,501

26,848

Total current liabilities

368,239

375,396

Convertible senior notes

17,016

16,608

258,499

260,152

Other liabilities

20,480

19,797

Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding as of June 30, 2018 and December 31, 2017

664,234

671,953

Stockholders' equity:

Common stock, $0.001 par value; 400,000,000 shares authorized; 212,409,152 and 211,262,906 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively

212

211

Additional paid-in capital

3,718,518

3,627,433

Accumulated other comprehensive loss

(9,809)

(7,010)

Accumulated deficit

(1,975,998)

(1,990,005)

Total stockholders' equity

1,732,923

1,630,629

Total liabilities and stockholders' equity

$ 2,397,157

$ 2,302,582

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
CONDENSED CONSOLIDATED BALANCE SHEETS
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	212,409,152	211,262,906
Common stock, shares outstanding	212,409,152	211,262,906

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues:
Total revenues	$ 521,516	$ 326,444	$ 903,798	$ 710,526
Costs and expenses:
Cost of product revenues (including definite-lived intangible amortization)	24,856	20,260	42,962	35,084
Research and development	298,089	201,786	601,192	609,706
Selling, general and administrative	108,029	90,066	229,527	177,295
Change in fair value of acquisition-related contingent consideration	7,303	7,073	13,988	14,429
Total costs and expenses	438,277	319,185	887,669	836,514
Income (loss) from operations	83,239	7,259	16,129	(125,988)
Other income (expense), net	5,808	4,066	10,270	5,213
Interest expense	(398)	(384)	(783)	(6,323)
Unrealized loss on long term investments	(34,641)	(19,574)	(11,962)	(25,388)
Expense related to senior note conversions		(751)		(54,881)
Income (loss) before provision (benefit) for income taxes	54,008	(9,384)	13,654	(207,367)
Provision (benefit) for income taxes	1,614	3,100	2,400	(7,800)
Net income (loss)	$ 52,394	$ (12,484)	$ 11,254	$ (199,567)
Net income (loss) per share:
Basic	$ 0.25	$ (0.06)	$ 0.05	$ (1.00)
Diluted	$ 0.24	$ (0.06)	$ 0.05	$ (1.00)
Shares used in computing net income (loss) per share:
Basic	212,210	205,141	211,945	200,200
Diluted	215,103	205,141	215,294	200,200
Product revenues, net
Revenues:
Total revenues	$ 365,524	$ 291,667	$ 700,029	$ 556,474
Product royalty revenues
Revenues:
Total revenues	55,953	34,769	103,669	63,990
Milestone revenues
Revenues:
Total revenues	100,000		100,000	90,000
Other revenues
Revenues:
Total revenues	$ 39	$ 8	$ 100	$ 62

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ 52,394	$ (12,484)	$ 11,254	$ (199,567)
Other comprehensive income (loss):
Foreign currency translation	100	(36)	135	(43)
Unrealized gain (loss) on marketable securities, net of tax	102	(97)	(403)	(131)
Unrealized gain on long term investment, net of tax (Note 2)		5,677		13,935
Defined benefit pension obligations, net of tax	111	47	222	93
Other comprehensive income (loss)	313	5,591	(46)	13,854
Comprehensive income (loss)	$ 52,707	$ (6,893)	$ 11,208	$ (185,713)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net income (loss)	$ 11,254	$ (199,567)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	26,925	27,379
Stock-based compensation	72,829	64,358
Expense related to senior note conversions		54,881
Other, net	172	146
Unrealized loss on long term investments	11,962	25,388
Change in fair value of acquisition-related contingent consideration	13,988	14,429
Changes in operating assets and liabilities:
Accounts receivable	(50,011)	(20,758)
Prepaid expenses and other assets	(23,589)	(33,492)
Inventory	1,878	4,462
Accounts payable	7,888	(6,506)
Accrued and other liabilities	(20,055)	12,436
Net cash provided by (used in) operating activities	53,241	(56,844)
Cash flows from investing activities:
Purchase of long term investments	(8,936)	(123,891)
Capital expenditures	(23,381)	(51,466)
Purchases of marketable securities	(58,827)	(115,254)
Sale and maturities of marketable securities	58,694	114,474
Net cash used in investing activities	(32,450)	(176,137)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock plans	18,043	49,461
Cash paid in connection with senior note conversions		(8,934)
Payment of contingent consideration	(9,886)	(8,035)
Net cash provided by financing activities	8,157	32,492
Effect of exchange rates on cash and cash equivalents	135	(43)
Net increase (decrease) in cash, cash equivalents, restricted cash and investments	29,083	(200,532)
Cash, cash equivalents, restricted cash and investments at beginning of period	900,434	653,229
Cash, cash equivalents, restricted cash and investments at end of period	929,517	452,697
Supplemental Schedule of Cash Flow Information
Interest paid	134	180
Income taxes paid	1,944	5,561
Unpaid purchases of property and equipment		10,866
Convertible Senior Notes 0.375 Percent Due 2018
Supplemental Schedule of Cash Flow Information
Reclassification to common stock and additional paid in capital in connection with conversions or exchange of convertible senior notes	$ 29	351,034
Convertible Senior Notes 1.25 Percent Due 2020
Supplemental Schedule of Cash Flow Information
Reclassification to common stock and additional paid in capital in connection with conversions or exchange of convertible senior notes		$ 330,010

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)	Jun. 30, 2018	Jun. 30, 2017
Convertible Senior Notes 0.375 Percent Due 2018
Interest rate of debt (as a percent)	0.375%	0.375%
Convertible Senior Notes 1.25 Percent Due 2020
Interest rate of debt (as a percent)	1.25%	1.25%

Organization and business	6 Months Ended
Organization and business	Jun. 30, 2018
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) and ICLUSIG® (ponatinib). Our operations are treated as one operating segment.

Summary of significant accounting policies	6 Months Ended
Summary of significant accounting policies	Jun. 30, 2018
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 June 30, 2018, the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2018 and 2017, and the condensed consolidated statements of cash flows for the six months ended June 30, 2018 and 2017 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, 2017 has been derived from audited 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, 2017. 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 on 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. We primarily invest our excess available funds in debt securities and, by policy, limit the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government and money market funds that meet certain guidelines. Our receivables mainly relate to our product sales of JAKAFI, ICLUSIG 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. 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 corporate debt securities and U.S. government 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 June 30, 2018 and December 31, 2017, we had no allowance for doubtful accounts. We provide an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are carried at fair value and charged off against the allowance for doubtful accounts when we determine that recovery is unlikely and we cease collection efforts. 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. JAKAFI raw materials and work-in-process inventory is not subject to expiration and the shelf life of finished goods inventory is 36 months from the start of manufacturing of the finished goods. ICLUSIG raw materials and work-in-process inventory is not subject to expiration and finished goods inventory has a shelf life of 24 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 June 30, 2018, there were no entities in which we held a variable interest which we determined to be VIEs. Long Term Equity Investments. Our long term equity investments consist of 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 our 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. Property and equipment 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. Management continually reviews the estimated useful lives of technologically sensitive equipment and believes that those estimates appropriately reflect the current useful life of our assets. In the event that a currently unknown significantly advanced technology became commercially available, we would re-evaluate the value and estimated useful lives of our existing equipment, possibly having a material impact on the financial statements. Lease Accounting. We account for operating leases by recording rent expense on a straight-line basis over the expected life of the lease, commencing on the date we gain possession of leased property. We include tenant improvement allowances and rent holidays received from landlords and the effect of any rent escalation clauses to determine the straight-line rent expense over the expected life of the lease. Capital leases are reflected as a liability at the inception of the lease based on the present value of the minimum lease payments or, if lower, the fair value of the property. Assets under capital leases are recorded in property and equipment, net on the condensed consolidated balance sheets and depreciated in a manner similar to other property and equipment. 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, 2017 and determined that the carrying value of our reporting unit 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. In addition, we follow the guidance related to accounting for uncertainty in income taxes. This guidance creates a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before it is recognized in the financial statements. Financing Costs Related to Long-term Debt. Costs associated with obtaining long-term debt are deferred and amortized over the term of the related debt using the effective interest method. Such costs are presented as a direct deduction from the carrying amount of the long-term debt liability, consistent with debt discounts, on the condensed consolidated balance sheets. Grant Accounting. Grant amounts received from government agencies for operations are deferred and are amortized into income over the service period of the grant. Grant amounts received for purchases of capital assets are deferred and amortized into other income (expense), net over the useful life of the related capital assets. Such amounts are recorded in other liabilities on the condensed consolidated balance sheets. 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 shares issuable upon the conversion of convertible debt 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 marketable securities that are classified as available-for-sale, foreign currency translation gains or losses and defined benefit pension obligations. For the year ended December 31, 2017 and interim periods therein, accumulated other comprehensive income (loss) included unrealized gains and losses on our long-term investment classified as available-for-sale in Calithera Biosciences, Inc. Upon adoption of ASU No. 2016-01, we recorded a $2.8 million adjustment to retained earnings as of January 1, 2018 which is further described below under “Recent Accounting Pronouncements.” Revenue Recognition. The new accounting standard for the recognition of revenue, ASC 606, Revenue from Contracts with Customers, was adopted for the fiscal year beginning on January 1, 2018. Per the new standard, revenue-generating contracts are assessed to identify distinct performance obligations, allocating transaction prices to those performance obligations, and criteria for satisfaction of a performance obligation. The new standard allows for recognition of revenue only 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. The standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time or satisfy the performance obligation at a point in time through analysis of the following criteria: (i) the entity has a present right to payment, (ii) the customer has legal title, (iii) the customer has physical possession, (iv) the customer has the significant risks and rewards of ownership and (v) the customer has accepted the asset. We assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer. Overall, adoption of the new standard did not significantly alter our methodology for recognition of revenue. Product Revenues Our product revenues consist of U.S. sales of JAKAFI and European sales of ICLUSIG. Product revenues are recognized once we meet the revenue recognition criteria described above. In November 2011, we began shipping JAKAFI to our customers in the U.S., which include specialty pharmacies and wholesalers. In June 2016, we acquired the right to and began shipping ICLUSIG to our customers in the European Union and certain other jurisdictions, which include retail pharmacies, hospital pharmacies and distributors. 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 50% 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. 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. We recognize royalty revenues in the period the sales occur. Cost of Product Revenues Cost of product revenues includes all JAKAFI related product costs as well as ICLUSIG related product costs. The ICLUSIG inventories were recorded at fair value less costs to sell in connection with our June 2016 acquisition of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l., since renamed Incyte Biosciences Luxembourg S.à.r.l. (the “Acquisition”), which resulted in a higher cost of ICLUSIG product revenues over a one year period from the acquisition date. 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. Subsequent to the Acquisition on June 1, 2016, cost of product revenues also includes the amortization of our licensed intellectual property for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years. Contract and License Revenues Our typical customer arrangements, which fall within the scope of ASC 606, Revenue from Contracts with Customers, include distinct drug compound out-licensing, collection of upfront payments, milestones or royalty revenues from a counterparty, and provision of commercially available products to suppliers. Our agreements often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and commercialization events outside of our control, such as regulatory approval of a compound, first patient dosing or achievement of sales-based thresholds. For such cases, we believe that revenue related to these events should not be recognized until the milestone has been achieved. Some contracts form collaborative arrangements of various types with third-parties. We assess whether the nature of the arrangement is within the scope of ASC 808, Collaborative Arrangements, in conjunction with the new revenue guidance to determine the nature of the performance obligations and associated transaction prices. A collaborative relationship may exist when we participate in an activity or process with another party, such as performance of research and development services or the exchange of intellectual property for use in clinical trials, when both parties share in the risks and rewards that result from the activity or participate and govern contract activities through a joint steering committee. The regulatory review and approval process, which includes preclinical testing and clinical trials of each drug candidate, is lengthy, expensive and uncertain. Securing approval by the U.S. Food and Drug Administration (the “FDA”) requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish a drug candidate’s safety and efficacy. The approval process takes many years, requires the expenditure of substantial resources, involves post-marketing surveillance and may involve ongoing requirements for post-marketing studies. Before commencing clinical investigations of a drug candidate in humans, we must submit an Investigational New Drug application (“IND”), which must be reviewed by the FDA. The steps generally required before a drug may be marketed in the United States include preclinical laboratory tests, animal studies and formulation studies, submission to the FDA of an IND for human clinical testing, performance of adequate and well-controlled clinical trials in three phases, as described below, to establish the safety and efficacy of the drug for each indication, submission of a new drug application (“NDA”) or biologics license application (“BLA”) to the FDA for review and FDA approval of the NDA or BLA. Similar requirements exist within foreign regulatory agencies as well. The time required satisfying the FDA requirements or similar requirements of foreign regulatory agencies may vary substantially based on the type, complexity and novelty of the product or the targeted disease. Preclinical testing includes laboratory evaluation of product pharmacology, drug metabolism and toxicity, which includes animal studies, to assess potential safety and efficacy as well as product chemistry, stability, formulation, development, and testing. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND. The FDA may raise safety concerns or questions about the conduct of the clinical trials included in the IND, and any of these concerns or questions must be resolved before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to commence. Clinical trials involve the administration of the investigational drug or the marketed drug to human subjects under the supervision of qualified investigators and in accordance with good clinical practices regulations covering the protection of human subjects. Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Phase I usually involves the initial introduction of the investigational drug into healthy volunteers to evaluate its safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase II usually involves clinical trials in a limited patient population to evaluate dosage tolerance and optimal dosage, identify possible adverse effects and safety risks, and evaluate and gain preliminary evidence of the efficacy of the drug for specific indications. Phase III clinical trials usually further evaluate clinical efficacy and safety by testing the drug in its final form in an expanded patient population, providing statistical evidence of efficacy and safety, and providing an adequate basis for labeling. We cannot guarantee that Phase I, Phase II or Phase III testing will be completed successfully within any specified period of time, if at all. Furthermore, we, the institutional review board for a trial, or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. 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 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. Therefore, as a drug candidate progresses through the stages of its life-cycle, the value of the drug candidate generally increases. Research and Development Costs. Our policy is to expense research and development costs as incurred. We often contract with clinical 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 at 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. Acquisition-Related Contingent Consideration. Acquisition-related contingent consideration, which consists of our future royalty and certain potential milestone obligations to Takeda Pharmaceutical Company Limited, which acquired ARIAD Pharmaceuticals, Inc. (“Takeda”), is recorded on the acquisition date 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. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which replaced numerous requirements in U.S. GAAP, including industry-specific requirements. This guidance provides a five step model to be applied to all contracts with customers, with an underlying principle that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. We performed an impact assessment which consisted of a review of a representative sample of contracts, discussions with key stakeholders, and cataloging of potential impacts on our financial statements, accounting policies, financial controls, and operations. The guidance did not have a material impact on our revenue recognition practices for product and royalty revenues. The adoption only impacted two areas in our recognition methodology for milestone and contract revenues generated by our collaborative research and license agreements: (i)Changes in the model for distinct licenses of functional intellectual property which may result in a timing difference of revenue recognition. Whereas revenue from these arrangements was previously recognized over a period of time pursuant to revenue recognition guidance that was in place for our arrangements at the time such arrangements commenced, revenue from new arrangements we enter into may now be recognized at a point in time. (ii)Assessments of milestone payments linked to events that are in our control, may result in variable consideration that may be recognized at an earlier point in time, when it is probable that the milestone will be achieved without a significant future reversal of cumulative revenue expected. We adopted the new standard for the fiscal period beginning January 1, 2018, utilizing the “modified retrospective” adoption methodology on all contracts for which performance had not been completed as of the date of adoption, and applied the guidance to report new disclosures surrounding our recognition of revenues. There was no cumulative effect of adopting the standard at the date of initial application in retained earnings. We have implemented a controls process to identify and evaluate all revenue-generating contracts with third-party customers on an on-going basis and have provided enhanced disclosures within this Form 10-Q to provide greater detail on our revenue-generating activities, see Notes 3 and 9. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The standard requires several changes including that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in results of operations. These provisions will not impact the accounting for our investments in corporate debt and U.S. government securities. The new guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. Amendments are to be applied as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this standard resulted in a $2.8 million decrease in our accumulated deficit as of January 1, 2018 related to our investment in Calithera Biosciences, Inc. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” that requires lessees to recognize assets and liabilities on the balance sheet for most leases including operating leases. Lessees will classify leases as either finance or operating leases and lessors classify all leases as sales-type, direct financing or operating leases. The statement of operations presentation and expense recognition for lessees for finance leases is similar to that of capital leases under Accounting Standards Codification (“ASC”) 840 with separate interest and amortization expense with higher periodic expense in the earlier periods of a lease. For operating leases, the statement of operations presentation and expense recognition is similar to that of operating leases under ASC 840 with single lease cost recognized on a straight-line basis. This guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements and is effective for annual periods beginning after December 15, 2018 and interim periods therein. We are currently analyzing the impact of ASU No. 2016-02 and, at this time, are unable to determine the impact of the new standard, on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, “Restricted Cash,” which requires entities to show the changes in total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions on the balance sheet. The reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. We adopted the new standard for the period beginning January 1, 2018. Due to the retrospective adoption of the standard, the cash flows from financing activities for the year ended December 31, 2017 and interim periods therein, no longer present the transfer of restricted investments to cash and cash equivalents. The change in total cash, cash equivalents, restricted cash and investments is now presented in the consolidated statement of cash flows and reconciles to the related captions on the consolidated balance sheet. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other,” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Under the new standard, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The new standard is effective for public business entities that are SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard is to be applied on a prospective basis. We are currently analyzing the impact of ASU No. 2017-04 on our consolidated financial statements. In March 2017, the FASB issued ASU No. 2017-07, “Compensation–Retirement Benefits,” which requires the service cost component of net periodic benefit cost to be presented in the same income statement line as other employee compensation costs arising from services rendered during the period and the other components of net periodic benefit cost to be presented separately from the income statement lines that include service cost and outside of any subtotal of operating income. We adopted the new standard for the period beginning January 1, 2018, resulting in no change in presentation of the service cost component of net periodic benefit cost, which has historically been reported in research and development and selling, general and administrative expenses along with other employee compensation costs. The retrospective adoption resulted in a change in presentation of the other components of net periodic benefit cost for the year ended December 31, 2017, and interim periods therein, which reclassed these costs out of operating income and into other income (expense), net on the consolidated statements of operations. The components of net periodic benefit cost are presented separately within our employee benefit plans footnote. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act of 2017 (the “Act”). In accordance with SAB 118, we recorded provisional tax impacts related to the revaluation of deferred tax assets and liabilities as well as the temporary full expensing of certain business assets in our consolidated financial statements for the year ended December 31, 2017. We continue to monitor and analyze further issued guidance, however no additional tax effects of the Act were required to be recorded for the three and six months ended June 30, 2018. The financial statement impact is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter of 2018, we have elected to treat any potential GILTI inclusions as a period charge in the future period in which it is incurred. We have determined there to be no impact associated with GILTI on our condensed consolidated financial statements as of and for the three and six months ended June 30, 2018. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement – Reporting Comprehensive Income,” which allows reclassification of certain tax effects created as a result of changing methodologies, laws and tax rates legislated in the Act. This new standard allows for stranded income tax effects resulting from the Act to be reclassified into retained earnings to allow for their tax effect to reflect the appropriate tax rate. Due to the full valuation allowance on our U.S. net deferred tax assets, a reclassification of stranded tax effects to retained earnings was not required.

Revenues

6 Months Ended

Jun. 30, 2018

Revenues

Revenues

3. Revenues

As discussed in Note 2, ASC 606, Revenue from Contracts with Customers, was adopted for the fiscal year beginning on January 1, 2018. Per the new standard, revenue-generating contracts are assessed to identify distinct performance obligations, allocating transaction prices to those performance obligations, and criteria for satisfaction of a performance obligation. The new standard allows for recognition of revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer. The standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time or satisfy the performance obligation at a point in time through analysis of the following criteria: (i) the entity has a present right to payment, (ii) the customer has legal title, (iii) the customer has physical possession, (iv) the customer has the significant risks and rewards of ownership and (v) the customer has accepted the asset. The new standard has been applied to contracts for which performance had not been completed as of the date of adoption. For those contracts that were modified prior to the date of adoption, we reflected the aggregate effect of those modifications when determining the appropriate accounting under the new standard. We do not believe the effect of applying this practical expedient resulted in material differences. Overall, adoption of the new standard did not significantly alter our methodology for recognition of revenue.

The following table presents our disaggregated revenue for the periods presented.


	For the Three Months Ended,				For the Six Months Ended,
	June 30,				June 30,
	2018		2017		2018		2017
	(in millions)				(in millions)
JAKAFI revenues, net	$	345.6	$	276.0	$	659.3	$	527.1
ICLUSIG revenues, net		19.9		15.7		40.7		29.4
Total product revenues, net		365.5		291.7		700.0		556.5
JAKAVI product royalty revenues		47.1		33.9		88.4		62.7
OLUMIANT product royalty revenues		8.9		0.9		15.3		1.3
Total product royalty revenues		56.0		34.8		103.7		64.0
Milestone revenues		100.0		—		100.0		90.0
Other revenues		—		—		0.1		0.1
Total revenues	$	521.5	$	326.5	$	903.8	$	710.6

For further information on our revenue-generating contracts, refer to our license agreements footnote.

Fair value of financial instruments

6 Months Ended

Jun. 30, 2018

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 corporate debt securities and U.S. government securities that are classified as available-for-sale.

At June 30, 2018 and December 31, 2017, our Level 2 corporate debt and U.S. government 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.

Our policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the end of the reporting period. There were no transfers out of or in to hierarchy levels during the six months ended June 30, 2018.

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


	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2018
Cash and cash equivalents	$	928,517	$	—	$	—	$	928,517
Debt securities (corporate and government)		—		269,865		—		269,865
Long term investments (Note 9)		131,330		—		—		131,330
Total assets	$	1,059,847	$	269,865	$	—	$	1,329,712


	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, 2017
Cash and cash equivalents	$	899,509	$	—	$	—	$	899,509
Debt securities (corporate and government)		—		270,136		—		270,136
Long term investment (Note 9)		134,356		—		—		134,356
Total assets	$	1,033,865	$	270,136	$	—	$	1,304,001

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 Assets		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2018
Contingent consideration	$	—	$	—	$	288,000	$	288,000
Total liabilities	$	—	$	—	$	288,000	$	288,000


	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, 2017
Contingent consideration	$	—	$	—	$	287,000	$	287,000
Total liabilities	$	—	$	—	$	287,000	$	287,000

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


	Level 3
Balance at January 1, 2018	$	287,000
Contingent consideration earned during the period but not yet paid		(6,303)
Payments made during the period		(6,685)
Change in fair value of contingent consideration		13,988
Balance at June 30, 2018	$	288,000

The fair value of the contingent consideration was determined using an income approach based on estimated ICLUSIG revenues in the European Union and other countries for the approved third line treatment. 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 change in fair value of the contingent consideration during the three and six months ended June 30, 2018 was due primarily to the passage of time as there were no other significant changes in the key assumptions during the period.

We make payments to Takeda quarterly based on the royalties or any additional milestone payments earned in the previous quarter. During the three months ended June 30, 2018, contingent consideration earned but not yet paid was $6.3 million and we paid Takeda $6.7 million for royalties earned in the first quarter of 2018 that were included in accrued and other current liabilities at March 31, 2018.

The following is a summary of our marketable security portfolio.


			Net		Net
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(in thousands)
June 30, 2018
Debt securities (corporate and government)	$	271,533	$	—	$	(1,668)	$	269,865

December 31, 2017
Debt securities (corporate and government)	$	271,401	$	—	$	(1,265)	$	270,136

Our debt securities generally have contractual maturity dates of between 12 to 18 months.

- 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

Concentration of credit risk

6 Months Ended

Jun. 30, 2018

Concentration of credit risk

Concentration of credit risk

5. Concentration of credit risk

In December 2009, we entered into a license, development and commercialization agreement with Lilly. In November 2009, we entered into a collaboration and license agreement with Novartis. The concentration of credit risk related to our collaborative partners is as follows:


	Percentage of Total				Percentage of Total
	Milestone Revenues for the				Milestone Revenues for the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Collaboration Partner A	—	%	—	%	—	%	28	%
Collaboration Partner B	100	%	—	%	100	%	72	%

Collaboration Partner A and Collaboration Partner B comprised, in aggregate, 50% and 47% of the accounts receivable balance as of June 30, 2018 and December 31, 2017, respectively.

In November 2011, we began commercialization and distribution of JAKAFI 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 product revenues is as follows:


	Percentage of Total Net				Percentage of Total Net
	Product Revenues for the				Product Revenues for the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Customer A	21	%	23	%	21	%	25	%
Customer B	15	%	16	%	14	%	16	%
Customer C	14	%	13	%	14	%	13	%
Customer D	12	%	9	%	11	%	8	%

We are exposed to risks associated with extending credit to customers related to the sale of products. Customer A, Customer B, Customer C and Customer D comprised, in aggregate, 26% and 25% of the accounts receivable balance as of June 30, 2018 and December 31, 2017, respectively.

The concentration of credit risk relating to ICLUSIG product revenues or accounts receivable is not significant.

Inventory

6 Months Ended

Jun. 30, 2018

Inventory

Inventory

6. Inventory

Our inventory balance consists of the following:


	June 30,		December 31,
	2018		2017
	(in thousands)
Raw materials	$	1,119	$	1,062
Work-in-process		5,582		8,615
Finished goods		5,869		4,771
		12,570		14,448
Inventories-current		5,869		6,482
Inventories-non-current	$	6,701	$	7,966

Inventories, stated at the lower of cost and net realizable value, consist of raw materials, work in process and finished goods. The ICLUSIG inventories acquired on June 1, 2016 totaling $4.0 million were recorded at fair value less costs to sell, and therefore, resulted in a higher cost of ICLUSIG revenues over a one year period from the acquisition date. At June 30, 2018, $5.9 million of inventory was classified as current on the condensed consolidated balance sheet as we expect this inventory to be consumed for commercial use within the next twelve months. At June 30, 2018, $6.7 million of inventory was classified as non-current 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.

Property and equipment, net

6 Months Ended

Jun. 30, 2018

Property and equipment, net

7. Property and equipment, net

Property and equipment, net consists of the following:


	June 30,		December 31,
	2018		2017
	(in thousands)
Office equipment	$	16,361	$	14,674
Laboratory equipment		57,409		48,807
Computer equipment		54,191		51,351
Land		5,350		5,350
Building and leasehold improvements		222,063		214,245
		355,374		334,427
Less accumulated depreciation and amortization		(87,788)		(74,664)
Property and equipment, net	$	267,586	$	259,763

In February 2018, we signed an agreement to rent a building in Morges, Switzerland for an initial term of 15 years, with multiple options to extend for an additional 20 years. The building will undergo extensive renovations prior to our occupation and, when completed, will serve as our new European headquarters. The new building will consist of approximately 100,000 square feet of office space. When complete, this building will allow for consolidation of our European operations that are currently located in Geneva and Lausanne, Switzerland.

Intangible assets and goodwill

6 Months Ended

Jun. 30, 2018

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 June 30, 2018

Balance at December 31, 2017

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

44,868

226,132

271,000

34,099

236,901

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


		Remainder of
		2018		2019		2020		2021		2022		Thereafter
Amortization expense	$	10,767	$	21,536	$	21,536	$	21,536	$	21,536	$	129,221

Goodwill

There were no changes to the carrying amount of goodwill for the six months ended June 30, 2018.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

License agreements	6 Months Ended
License agreements	Jun. 30, 2018
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. We retained options to co-develop and to co-promote capmatinib in the United States. 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 commercialization 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 aggregate, $132.0 million for the achievement of development milestones, $215.0 million for the achievement of regulatory milestones and $60.0 million for the achievement of sales milestones through June 30, 2018. During the year ended December 31, 2017, under this agreement, we recognized a $40.0 million sales milestone for Novartis achieving annual net sales of a JAK licensed product of $600.0 million and a $25.0 million development milestone based on the formal initiation by Novartis of a Phase III clinical trial evaluating ruxolitinib in GVHD. In 2016, we recognized a $5.0 million payment in exchange for the development and commercialization rights to ruxolitinib in GVHD outside of the United States and a $40.0 million regulatory milestone for the reimbursement of JAKAVI in Europe for the treatment of patients with polycythemia vera. In 2015, we recognized a $5.0 million development milestone based on the formal initiation by Novartis of a Phase II clinical trial evaluating capmatinib for a third indication, a $25.0 million regulatory milestone triggered by the Committee for Medicinal Products for Human Use of the European Medicines Agency adopting a positive opinion for JAKAVI (ruxolitinib) for the treatment of adult patients with polycythemia vera who are resistant to or intolerant of hydroxyurea, a $15.0 million regulatory milestone for the approval of JAKAVI in Japan for the treatment of patients with polycythemia vera, and a $20.0 million sales milestone for Novartis achieving annual net sales of a JAK licensed product of $300.0 million. In 2014, we recognized a $60.0 million regulatory milestone related to reimbursement of JAKAVI in Europe, a $25.0 million regulatory milestone for the approval of JAKAVI in Japan for the treatment of patients with myelofibrosis and a $7.0 million development milestone based on the formal initiation by Novartis of a Phase II clinical trial evaluating capmatinib in non-small cell lung cancer. In 2013, we recognized a $25.0 million development milestone based on the formal initiation by Novartis of a Phase II clinical trial evaluating capmatinib. In 2012, we recognized a $40.0 million regulatory milestone for the achievement of a predefined milestone for the European Union regulatory approval of JAKAVI. In 2011, we recognized a $15.0 million development milestone for the achievement of a predefined milestone in the Phase I dose-escalation trial for capmatinib in patients with solid tumors and a $10.0 million regulatory milestone for the approval of JAKAFI in the United States. In 2010, we recognized $50.0 million in development milestones for the initiation of the global Phase III trial, RESPONSE, in patients with polycythemia vera. We determined that each of these milestones were substantive as their achievement required substantive efforts by us and was at risk until the milestones were ultimately achieved. 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 future capmatinib 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 six months ended June 30, 2018, such royalties payable to Novartis on net sales within the United States totaled $16.9 million and $27.3 million, respectively, and are reflected in cost of product revenues on the condensed consolidated statements of operations. During the three and six months ended June 30, 2017, such royalties payable to Novartis on net sales within the United States totaled $13.0 million and $20.8 million, respectively, and are reflected in cost of product revenues on the condensed consolidated statements of operations. 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. We determined that there were two deliverables under the agreement: (i) the ex-U.S. license for ruxolitinib and (ii) our obligations in connection with our participation on the joint development committee for myelofibrosis and polycythemia vera/essential thrombocythemia. We concluded that these deliverables should be accounted for as a single unit of accounting and the $150.0 million upfront payment received in December 2009 and the immediate $60.0 million milestone payment received in January 2010 should be recognized on a straight-line basis through December 2013, when we estimated we would complete our obligations in connection with our participation on the joint development committee for myelofibrosis and polycythemia vera, our estimated performance period under the agreement. We completed this substantive performance obligation related to this arrangement in December 2013. At December 31, 2009, we recorded $10.9 million of reimbursable costs incurred prior to the effective date of the agreement as deferred revenue on the consolidated balance sheet. These costs were recognized on a straight-line basis through December 2013 consistent with the aforementioned upfront and milestone payments. Future reimbursable costs incurred after the effective date of the agreement with Novartis are recorded net against the related research and development expenses. At June 30, 2018 and December 31, 2017, $1.3 million and $1.6 million, respectively, of reimbursable costs were included in accounts receivable on the condensed consolidated balance sheets. Research and development expenses for the three and six months ended June 30, 2018 were net of $0.7 million and $1.2 million, respectively, of costs reimbursed by Novartis. Research and development expenses for the three and six months ended June 30, 2017 were net of $0.8 million and $1.5 million, respectively, of costs reimbursed by Novartis. Milestone revenue under the Novartis agreement for the three and six months ended June 30, 2018 was $0.0 million. Milestone revenue under the Novartis agreement for the three and six months ended June 30, 2017 was $0.0 million and $25.0 million, respectively. Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2018 was $47.1 million and $88.4 million, respectively. Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2017 was $33.9 million and $62.7 million, respectively. At June 30, 2018 and December 31, 2017, $47.1 million and $47.7 million, respectively, of product royalties were included in accounts receivable on the condensed consolidated balance sheets. 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 commercialization milestones. Exclusive of the upfront payment of $90.0 million received in 2009, we have recognized and received, in aggregate, $129.0 million for the achievement of development milestones and $235.0 million for the achievement of regulatory milestones through June 30, 2018. 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 OLUMIANT for 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. During the three months ended June 30, 2018, under this agreement, we recognized a $100.0 million regulatory milestone for the FDA approval of the 2mg dose of OLUMIANT (baricitinib) for the treatment of adults with moderately-to-severely active rheumatoid arthritis. In 2017, we recognized a $30.0 million development milestone for the first patient treated in the atopic dermatitis Phase III program for baricitinib, $15.0 million regulatory milestone for the approval of baricitinib for the treatment of rheumatoid arthritis by Japan’s Ministry of Health, Labor and Welfare and a $65.0 million regulatory milestone for the approval of baricitinib for the treatment of moderate-to-severe rheumatoid arthritis in adult patients by the European Commission. In 2016, we recognized a $35.0 million regulatory milestone for the submission of an NDA to the FDA for the approval of oral once-daily baricitinib for the treatment of moderate-to-severe rheumatoid arthritis and a $20.0 million regulatory milestone for the submission of a Marketing Authorization Application to the European Medicines Agency for the approval of oral once-daily baricitinib for the treatment of moderate-to-severe rheumatoid arthritis. In 2012, we recognized a $50.0 million development milestone for the initiation of the rheumatoid arthritis Phase III program for baricitinib. In 2010, we recognized a $30.0 million development milestone based upon the initial three month data in the Phase IIa clinical trial of baricitinib for the treatment of rheumatoid arthritis and a $19.0 million development milestone for the Phase IIb clinical trial initiation of baricitinib for the treatment of rheumatoid arthritis. We determined that each of these milestones were substantive as their achievement required substantive efforts by us and was at risk until the milestones were ultimately achieved. In July 2010, we elected to co-develop baricitinib with Lilly in rheumatoid arthritis and we are 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 have exercised our co-development options in psoriatic arthritis, atopic dermatitis, alopecia areata, systemic lupus erythematosus and axial spondyloarthritis to fund 30% of future global development costs through regulatory approval, including post-launch studies required by a regulatory authority. 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. 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. Research and development expenses recorded under the Lilly agreement representing 30% of the global development costs for baricitinib for the treatment of rheumatoid arthritis, psoriatic arthritis, atopic dermatitis, alopecia areata, systemic lupus erythematosus and axial spondyloarthritis for the three and six months ended June 30, 2018 were $14.2 million and $26.7 million, respectively. Research and development expenses recorded under the Lilly agreement representing 30% of the global development costs for baricitinib for the treatment of rheumatoid arthritis, psoriatic arthritis and atopic dermatitis for the three and six months ended June 30, 2017 were $8.7 million and $18.1 million, respectively. We have retained certain mechanisms to give us cost protection as baricitinib advances in clinical development. We can defer our portion of co-development study costs by indication if they exceed a predetermined level. This deferment would be credited against future milestones or royalties and we would still be eligible for the full incremental royalties related to the co-development option. In addition, even 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. 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. We determined that there were two deliverables under the agreement: (i) the worldwide license and (ii) our obligations in connection with a co-development option. We concluded that these deliverables should be accounted for as a single unit of accounting and the $90.0 million upfront payment should be recognized on a straight-line basis as revenue through December 2016, our estimated performance period under the agreement. We completed our substantive performance obligation related to this arrangement in December 2016. Milestone revenue under the Lilly agreement for the three and six months ended June 30, 2018 was $100.0 million. Milestone revenue under the Lilly agreement for the three and six months ended June 30, 2017 was $0.0 million and $65.0 million, respectively. Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and six months ended June 30, 2018 was $8.9 million and $15.3 million, respectively. Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and six months ended June 30, 2017 was $0.9 million and $1.3 million, respectively. At June 30, 2018 and December 31, 2017, $8.9 million and $4.6 million, respectively, of product royalties were included in accounts receivable on the condensed consolidated balance sheets. 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. We paid Lilly an upfront payment of $35.0 million and Lilly is eligible to receive up to $40.0 million in additional regulatory milestone payments relating to ruxolitinib in the GVHD field. 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. 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. Under the Amended Agreement, we paid Agenus $20.0 million in accelerated milestones relating to the clinical development of the GITR and OX40 programs, which is recorded in research and development expense on the consolidated statement of operations during the year ended December 31, 2017. Agenus is eligible to receive up to an additional $510.0 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 June 2018, we recorded a $5.0 million development milestone due to Agenus for the LAG-3 program which is recorded in research and development expense on the condensed consolidated statement of operations during the three and six months ended June 30, 2018. 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 on the condensed consolidated balance sheets and $20.5 million was allocated to research and development expense on the consolidated statement of operations during the six months ended June 30, 2017. We have 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. From the date of our initial stock purchase in February 2015 and up to the date of our second stock purchase in February 2017, we owned between 9% and 11% of the outstanding shares of Agenus Inc. common stock. As a result of our February 2017 stock purchase, we owned approximately 17% of the outstanding shares of Agenus Inc. common stock as of June 30, 2018. We concluded that we have the ability to exercise significant influence, but not control, over Agenus Inc. based primarily on our ownership interest, the fact that we have been the largest Agenus stockholder since the date of our initial stock purchase, the level of intra-entity transactions between us and Agenus 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 Agenus Inc. 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 six months ended June 30, 2018, we recorded an unrealized loss of $43.3 million and $17.6 million, respectively, based on the changes in market price of Agenus Inc.’s common stock during these periods. For the three and six months ended June 30, 2017, we recorded an unrealized gain of $4.4 million and an unrealized loss of $3.3 million, respectively, based on the changes in market price of Agenus Inc.’s common stock during these periods. The fair market value of our long term investment in Agenus Inc. at June 30, 2018 and December 31, 2017 was $40.3 million and $57.9 million, respectively. Research and development expenses for the three and six months ended June 30, 2018 also included $0.9 million and $2.8 million, respectively, of development costs incurred pursuant to the Agenus arrangement. Research and development expenses for the three and six months ended June 30, 2017 also included $11.2 million and $18.9 million, respectively, of development costs incurred pursuant to the Agenus arrangement. At June 30, 2018 and December 31, 2017, a total of $0.9 million and $3.2 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets. In February 2018, Agenus’ independent registered public accounting firm, KPMG LLP, expressed substantial doubt within Agenus’ Form 10-K filing regarding the entity’s ability to continue as a going concern. During the second quarter of 2018, Agenus experienced a significant decline in stock price. In Agenus’ March 31, 2018 Form 10-Q filed May 10, 2018, they noted approximately $52.3 million in cash and cash equivalents and quarterly operating expenses of approximately $43.4 million. For the three months ended March 31, 2018, Agenus Inc. reported total revenues of $1.6 million and net loss of $54.3 million within their consolidated financial statements. At this time, we have no plans to participate in any future equity-based fundraising, and, in the event of any future equity-based fundraising, anticipate dilution of our ownership percentage and a significant permanent decrease in the value of our overall investment. Merus In December 2016, we entered into a Collaboration and License Agreement with Merus N.V. 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, including two of Merus’ current preclinical immuno-oncology discovery programs. We received exclusive development and commercialization rights outside of the United States to products and product candidates resulting from one of Merus’ current preclinical discovery programs, referred to as “Program 1.” We also received worldwide exclusive development and commercialization rights to products and product candidates resulting from the other current Merus preclinical discovery program that is subject to the collaboration and to up to nine additional programs. Merus retained exclusive development and commercialization rights in the United States to products and product candidates resulting from Program 1 and options, subject to certain conditions, to co-fund development of products resulting from two other programs in exchange for a share of profits in the United States. Should Program 1 fail to successfully complete IND-enabling toxicology studies, Merus would be granted an additional option to co-fund development of a program in exchange for a share of profits in the United States. All costs related to the collaboration are subject to joint research and development plans. Each party will share equally the costs of mutually agreed global development activities for Program 1, and fund itself any independent development activities in its territory. We will be responsible for all research, development and commercialization costs relating to all other programs, subject to Merus’ election to co-fund development and co-detail described above. 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. In February 2017, we paid Merus an upfront non-refundable payment of $120.0 million, which is recorded in research and development expense on the condensed consolidated statement of operations. For each program as to which Merus does not have commercialization or co-development 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 non-co-developed programs and, depending on the stage at which Merus chose to cease co-funding development costs, additional royalties ranging up to 4% of net sales in the United States. For Program 1, 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 agreed to certain standstill provisions whereby we are obligated to refrain from taking certain actions with respect to Merus or Merus’ common shares during a period ending on the earliest of (i) three years from the closing date of our share purchase, (ii) the date Merus publicly announces any merger or similar business combination or another party announces an intention to acquire a substantial portion of Merus’ securities, and (iii) the termination of the Collaboration and License Agreement. The standstill provisions are subject to certain exceptions, including an exception that allows us to maintain our percentage ownership following equity financings by Merus. We also agreed, subject to limited exceptions, not to sell or otherwise transfer any of our Merus shares for a period, referred to as the Lock-Up Period, ending on the earlier of 18 months after the closing date of the sale of the Shares or the end of the standstill period. In addition, if the standstill period has not been terminated earlier upon the occurrence of certain events, for a period of three years after the Lock-Up Period, we will be restricted from selling or otherwise transferring more than one-third of our Merus shares during any 12-month period or 10% of our Merus shares during any three-month period, unless Merus consents otherwise. We have further agreed that during the standstill period, we will vote all of our Merus shares in accordance with the recommendation of a majority of Merus’ supervisory board. However, we may vote our Merus shares at our own discretion for certain extraordinary matters, including a change in control of Merus. Merus has agreed to customary resale registration rights with respect to our Merus shares; however, any such resales will be subject to the Lock-Up Period and volume limitations on sale and transfer described above. 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 on the consolidated balance sheets and $7.2 million was allocated to research and development expense on the consolidated statement of operations during the six months ended June 30, 2017. The fair market value of our total long term investment in Merus at June 30, 2018 and December 31, 2017 was $72.8 million and $62.1 million, respectively. We have 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 June 30, 2018, we owned approximately 14% of the outstanding shares of Merus common stock 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 six months ended June 30, 2018 we recorded an unrealized gain of $13.5 million and $10.8 million, respectively, based on the changes in the market price of Merus’ common stock during these periods. For the three and six months ended June 30, 2017 we recorded unrealized losses of $23.9 million and $22.0 million, respectively, based on the changes in the market price of Merus’ common stock during these periods. For the fiscal year ended December 31, 2017, Merus N.V. reported within their Form 20-F total revenues of approximately €13.6 million and net loss of approximately €73.0 million within their consolidated financial statements. Research and development expenses for the three and six months ended June 30, 2018 included $2.8 million and $5.2 million, respectively, of additional development costs incurred pursuant to the Merus agreement. Research and development expenses for the three and six months ended June 30, 2017 included $1.5 million and $2.6 million, respectively, of additional development costs incurred pursuant to the Merus agreement. At June 30, 2018 and December 31, 2017, a total of $2.4 million and $2.1 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. Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase inhibitors, including CB-1158, which is currently in Phase I clinical trials, for hematology and oncology indications. 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. Calithera may opt out of its co-funding obligation, in which case the U.S. profit sharing will no longer be in effect, and we have agreed to 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. In January 2017, we paid Calithera an upfront license fee of $45.0 million and have agreed to pay potential development, regulatory and sales milestone payments of over $430.0 million if the profit share is in effect, or $750.0 million if the profit share terminates. In March 2017, Calithera earned a $12.0 million milestone payment from us for the achievement of pharmacokinetic and pharmacodynamics goals for CB-1158 which was recorded in research and development expense on our consolidated statement of operations. 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 common shares 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 on the consolidated balance sheets and $41.4 million was allocated to research and development expense on the consolidated statement of operations during the six months ended June 30, 2017. The fair market value of our long term investment in Calithera at June 30, 2018 and December 31, 2017 was $8.6 million and $14.4 million, respectively. We have 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 June 30, 2018, we owned approximately 5% of the outstanding shares of Calithera common stock and there are several other stockholders who hold larger positions of Calithera. We intend to hold the investment in Calithera for the foreseeable future, and thereby have classified the investment within long term investments on the accompanying condensed consolidated balance sheets. Under guidance implemented by ASU No. 2016-01, the investment is marked to market through earnings in each reporting period. Prior to implementation, the unrealized gains and losses on our investment in Calithera were recorded in accumulated other comprehensive income (loss). To adopt ASU No. 2016-01, the January 1, 2018 accumulated deficit balance decreased by $2.8 million to reflect these prior period unrealized gains. For the three and six months ended June 30, 2018 we recorded an unrealized loss of $2.2 million and $5.8 million, respectively, based on the changes in market price of Calithera’s common stock during these periods. For the three and six months ended June 30, 2017 we recorded unrealized gains of $5.7 million and $13.9 million, respectively, based on the changes in market price of Calithera’s common stock during these periods. In March 2017, Calithera earned a $12.0 million milestone payment from us for the achievement of pharmacokinetic and pharmacodynamics goals for CB-1158 which was recorded in research and development expense on our condensed consolidated statement of operations during the six months ended June 30, 2017. Research and development expenses for the three and six months ended June 30, 2018 also included $3.2 million and $5.8 million, respectively, of additional development costs incurred pursuant to the Calithera agreement. Research and development expenses for the three and six months ended June 30, 2017 also included $2.0 million and $3.6 million, respectively, of additional development costs incurred pursuant to the Calithera agreement. At June 30, 2018 and December 31, 2017, a total of $2.8 million and $0.9 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. 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. In December 2017, we paid MacroGenics an upfront payment of $150.0 million which was recorded in research and development expense on our consolidated statement of operations. MacroGenics will be eligible to receive up to $420.0 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 six months ended June 30, 2018 also included $10.9 million and $17.4 million, respectively, of additional development costs incurred pursuant to the MacroGenics agreement. At June 30, 2018 and December 31, 2017, a total of $17.5 million and $1.1 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. 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 commercial milestones. Syros is also eligible to receive low single-digit royalties on net sales of products resulting from the collaboration. In January 2018, we paid Syros an upfront non-refundable (except in the event of a material breach of the agreement by Syros) payment of $10.0 million, which was recorded in research and development expense during the six months ended June 30, 2018. In addition, in January 2018, we entered into a Stock Purchase Agreement with Syros for the purchase of 0.8 million common shares 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 on the condensed consolidated balance sheet and $2.4 million, representing premium paid on the purchase, was allocated to research and development expense on the condensed consolidated statement of operations for the six months ended June 30, 2018. 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 sheet. 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 June 30, 2018 was $9.6 million. We have 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 June 30, 2018, we owned approximately 3% 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 under ASU No. 2016-01, 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 sheet. For the three and six months ended June 30, 2018, we recorded an unrealized loss of $2.6 million and an unrealized gain of $0.6 million, respectively, based on the changes in market price of Syros’ common stock from the date of purchase.

Stock compensation

6 Months Ended

Jun. 30, 2018

Stock compensation

Stock compensation

10. Stock compensation

We recorded $36.6 million and $72.8 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2018, respectively. We recorded $33.8 million and $64.4 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2017, respectively. Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $24.8 million, $49.0 million, $22.9 million and $44.4 million for the three and six months ended June 30, 2018 and 2017, respectively. Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $11.8 million, $23.8 million, $10.9 million and $20.0 million for the three and six months ended June 30, 2018 and 2017, respectively.

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


	Employee Stock Options								Employee Stock Purchase Plan
	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended				For the Six Months Ended
	June 30,								June 30,
	2018		2017		2018		2017		2018		2017		2018		2017
Average risk-free interest rates	2.71	%	1.56	%	2.47	%	1.79	%	2.52	%	1.38	%	2.50	%	1.31	%
Average expected life (in years)	5.37		5.41		5.50		5.36		0.50		0.50		0.50		0.50
Volatility	46	%	50	%	45	%	49	%	30	%	42	%	51	%	42	%
Weighted-average fair value (in dollars)	28.65		60.44		39.47		52.87		12.11		17.55		16.25		18.80

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.

Option activity under the 2010 Stock Plan was as follows:


		Shares Subject to
		Outstanding Options
	Shares Available		Weighted Average
	for Grant	Shares	Exercise Price
Balance at December 31, 2017	3,909,701	11,206,553	$	68.36
Additional authorization	5,000,000	—		—
Options granted	(1,565,286)	1,565,286	$	89.67
Options exercised	—	(844,619)	$	22.03
Options cancelled	244,146	(244,146)	$	100.67
Balance at June 30, 2018	7,588,561	11,683,074	$	73.89

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.

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


		Shares Subject to
	Shares Available	Outstanding Awards
	for Grant	Shares	Grant Date Value
Balance at December 31, 2017	769,202	1,178,660	$	98.88
Additional authorization	1,000,000	—		—
RSUs granted	(322,593)	322,593	$	73.90
PSUs granted	(446,500)	446,500	$	65.76
RSUs cancelled	43,588	(43,588)	$	103.70
RSUs released	—	(176,590)	$	81.70
Balance at June 30, 2018	1,043,697	1,727,575	$	87.29

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.

Also, in January 2014, Hervé Hoppenot, our President and Chief Executive Officer, was granted a one-time grant of 400,000 RSUs outside of our 2010 Stock Incentive Plan. Vesting of the RSUs will be subject to Mr. Hoppenot’s continued employment on the applicable vesting dates, with one-sixth of the RSUs vesting at the end of each of the calendar years 2014 through 2019, subject to earlier acceleration of vesting upon the occurrence of certain events in accordance with the terms of his employment agreement. As of June 30, 2018, a cumulative total of 266,667 RSUs granted to Mr. Hoppenot had vested and were released, leaving 133,333 RSUs outstanding.

In June 2018, we granted 190,000 RSUs and 446,500 PSUs under long term incentive plans with performance and service-based milestones with graded and cliff vesting over three to four years. For one of the 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 are subject to a multiplier of up to 267% based on the level at which the performance conditions are achieved. Compensation expense for the performance-based awards is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement. For the period ended June 30, 2018, the performance conditions were not deemed probable of achievement, therefore the stock compensation expense recorded during the period was for service-based awards.

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

Total compensation cost of options granted but not yet vested, as of June 30, 2018, was $100.5 million, which is expected to be recognized over the weighted average period of approximately 1.6 years. Total compensation cost of RSUs granted but not yet vested, as of June 30, 2018, was $53.9 million, which is expected to be recognized over the weighted average period of approximately 1.5 years. Total compensation cost of PSUs granted but not yet vested, as of June 30, 2018, was $26.7 million, which will begin to be recognized should the performance conditions be deemed probable of achievement.

The following table summarizes our share activity:


		Shares Issued
		and Outstanding
Balance at December 31, 2017		211,262,906
Exercise of stock options and issuance under ESPP		997,470
Settlement of employee restricted stock units		148,199
Conversion of convertible senior notes		577
Balance at June 30, 2018		212,409,152

Debt

6 Months Ended

Jun. 30, 2018

Debt

Debt

11. Debt

The components of the convertible notes are as follows (in thousands):


				Carrying Amount,
	Interest Rates			June 30,		December 31,
Debt	June 30, 2018		Maturities	2018		2017
0.375% Convertible Senior Notes due 2018	0.375	%	2018	$	7,554		7,393
1.25% Convertible Senior Notes due 2020	1.25	%	2020		17,016		16,608
					24,570		24,001
Less current portion					7,554		7,393
				$	17,016	$	16,608

The carrying amount and fair value of our convertible notes are as follows (in thousands):


	June 30, 2018				December 31, 2017
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
0.375% Convertible Senior Notes due 2018	$	7,554	$	10,137	$	7,393	$	14,129
1.25% Convertible Senior Notes due 2020		17,016		26,138		16,608		35,431
	$	24,570	$	36,275	$	24,001	$	49,560

The fair values of the 0.375% Convertible Senior Notes due 2018 (the “2018 Notes”) and the 1.25% Convertible Senior Notes due 2020 (the “2020 Notes”) are based on data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments, and, therefore, these convertible senior notes are classified within Level 2 in the fair value hierarchy.

Prior to May 14, 2014, the 2018 Notes and 2020 Notes were not convertible except in connection with a make-whole fundamental change, as defined in the respective indentures. Beginning on, and including, May 15, 2014, the 2018 and 2020 Notes are convertible prior to the close of business on the business day immediately preceding May 15, 2018, in the case of the 2018 Notes, and May 15, 2020, in the case of the 2020 Notes, only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on March 31, 2014 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2018 Notes or 2020 Notes, as applicable, on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2018 Notes or 2020 Notes, as applicable, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the 2018 Notes or 2020 Notes, as applicable, on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after May 15, 2018, in the case of the 2018 Notes, and May 15, 2020, in the case of the 2020 Notes, until the close of business on the second scheduled trading day immediately preceding the relevant maturity date, the Notes are convertible at any time, regardless of the foregoing circumstances. Upon conversion we will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election.

On July 1, 2018, the 2020 Notes became convertible through at least September 30, 2018, based on meeting the conversion criteria related to the sale price of our common stock during the calendar quarter ended June 30, 2018 as described in (i) above. The 2018 Notes will mature in November 2018, and accordingly, are classified in short term liabilities on the condensed consolidated balance sheet as of June 30, 2018. The 2020 Notes are reflected in long term liabilities on the condensed consolidated balance sheet as of June 30, 2018 as management’s intent is to settle any conversions of the 2020 Notes during this period in shares of our common stock.

During the six months ended June 30, 2017, we entered into separately negotiated agreements with certain holders of the 2018 Notes pursuant to which such holders agreed to exchange a total of $367.2 million in aggregate principal amount of the 2018 Notes for the shares of our common stock into which the 2018 Notes were originally convertible, aggregating 7.1 million shares, an additional 0.1 million of premium shares (equivalent to $12.6 million in value) and $2.0 million in cash. Similarly we entered into separately negotiated agreements with certain holders of the 2020 Notes pursuant to which such holders agreed to exchange a total of $355.6 million in aggregate principal amount of the 2020 Notes for the shares of our common stock into which the 2020 Notes were originally convertible, aggregating 6.9 million shares, an additional 0.2 million of premium shares (equivalent to $26.8 million in value) and $7.0 million in cash. Included in the agreements were those with entities affiliated with Julian C. Baker, one of our directors, which agreed to exchange $259.0 million in aggregate principal amount of the 2018 Notes and $274.5 million in aggregate principal amount of the 2020 Notes for an aggregate of 10.6 million shares.

Pursuant to the guidance within ASC 470-20-40-20, we measured the difference between the fair value and carrying value of the liability portions of the 2018 Notes and 2020 Notes, which resulted in recording expense related to senior note conversions of $1.4 million related to the 2018 Notes and $5.1 million related to the 2020 Notes. The estimated fair value of the debt component was determined using a valuation model which is subject to judgement. Assumptions used within the valuation model include an estimated credit rating and an estimated market-based cost of debt. These assumptions were used to perform a discounted cash flow analysis on the future interest and principal payments to determine the estimated fair value of the debt at inducement.

In addition, the fair value of the premium shares issued pursuant to these agreements as well as the cash paid in connection with the agreements totaled $48.4 million and is also included within expense related to senior note conversions on the condensed consolidated statement of operations during the six months ended June 30, 2017.

Employee benefit plans

6 Months Ended

Jun. 30, 2018

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. Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations. Defined contribution expense for the three and six months ended June 30, 2018 was $2.8 million and $5.5 million, respectively. Defined contribution expense for the three and six months ended June 30, 2017 was $2.3 million and $4.5 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 net periodic benefit cost was as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Service cost	$	1,032	$	680	$	2,111	$	1,296
Interest cost		68		52		139		98
Expected return on plan assets		(47)		(38)		(97)		(73)
Amortization of prior service cost		45		13		90		25
Amortization of actuarial losses		66		34		132		68
Net periodic benefit cost	$	1,164	$	741	$	2,375	$	1,414

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 $3.2 million to the plans in 2018 inclusive of the amounts contributed to the plan during the current period. As of June 30, 2018 and December 31, 2017, $13.7 million and $13.4 million, respectively, of accrued pension obligation is recorded in other long term liabilities on the condensed consolidated balance sheets.

Income taxes	6 Months Ended
Income taxes	Jun. 30, 2018
Income taxes
Income taxes	13. Income taxes For the three and six months ended June 30, 2018, we recorded income tax expense of approximately $1.6 million and $2.4 million, respectively. For the three and six months ended June 30, 2017, we recorded income tax expense of approximately $3.1 million and an income tax benefit of approximately $7.8 million, respectively. The change in tax expense for the three and six months ended June 30, 2018 was primarily driven by the difference in projected annual operating income or loss compared to our actual results as well as the recognition of certain discrete items in the current period. As of June 30, 2018, a full valuation allowance continues to be recorded against our U.S. and Swiss net deferred tax assets. This position is based on an analysis of positive and negative evidence, including analyzing three-year cumulative pre-tax income or loss, projections of future taxable income as well as other quantitative and qualitative information. The balance of our unrecognized tax benefits (including penalties and interest) increased by approximately $2.4 million during the six months ended June 30, 2018, of which only $0.3 million was recorded as an increase to noncurrent other liabilities on the condensed consolidated balance sheet. The increase is primarily driven by unrecognized tax benefits related to current year operations. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law, making significant changes to the Internal Revenue Code. The Act contains numerous provisions impacting corporate taxpayers. Changes include a federal corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and temporary full expensing of certain business assets. We recorded provisional tax impacts related to the revaluation of deferred tax assets and liabilities as well as the temporary full expensing of certain business assets in our consolidated financial statements for the year ended December 31, 2017. We continue to monitor and analyze further issued guidance, however no additional tax effects of the Act were required to be recorded for the six months ended June 30, 2018. The financial statement impact is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.

Net income (loss) per share

6 Months Ended

Jun. 30, 2018

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:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)		2018	2017			2018	2017
Basic Net Income (Loss) Per Share
Basic net income (loss)	$	52,394	$	(12,484)	$	11,254	$	(199,567)
Weighted average common shares outstanding		212,210		205,141		211,945		200,200

Basic net income (loss) per share	$	0.25	$	(0.06)	$	0.05	$	(1.00)

Diluted Net Income (Loss) Per Share
Diluted net income (loss)	$	52,394	$	(12,484)	$	11,254	$	(199,567)
Weighted average common shares outstanding		212,210		205,141		211,945		200,200

Dilutive stock options and RSUs		2,893		—		3,349		—

Weighted average shares used to compute diluted net income (loss) per share		215,103		205,141		215,294		200,200

Diluted net income (loss) per share	$	0.24	$	(0.06)	$	0.05	$	(1.00)

The following potential common shares were excluded from the calculations as their effect would be anti-dilutive:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2018	2017	2018	2017
Outstanding stock options and awards	8,079,446	12,085,346	6,732,551	12,085,346
Common shares issuable upon conversion of the 2018 Notes	148,817	149,603	148,817	149,603
Common shares issuable upon conversion of the 2020 Notes	368,939	368,939	368,939	368,939
Total potential common shares excluded from diluted net loss per share computation	8,597,202	12,603,888	7,250,307	12,603,888

Summary of significant accounting policies (Policies)	6 Months Ended
Summary of significant accounting policies (Policies)	Jun. 30, 2018
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 June 30, 2018, the condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2018 and 2017, and the condensed consolidated statements of cash flows for the six months ended June 30, 2018 and 2017 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, 2017 has been derived from audited 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, 2017.
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 on 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. We primarily invest our excess available funds in debt securities and, by policy, limit the amount of credit exposure to any one issuer and to any one type of investment, other than securities issued or guaranteed by the U.S. government and money market funds that meet certain guidelines. Our receivables mainly relate to our product sales of JAKAFI, ICLUSIG 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.
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 corporate debt securities and U.S. government 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 June 30, 2018 and December 31, 2017, we had no allowance for doubtful accounts. We provide an allowance for doubtful accounts based on experience and specifically identified risks. Accounts receivable are carried at fair value and charged off against the allowance for doubtful accounts when we determine that recovery is unlikely and we cease collection efforts.
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. JAKAFI raw materials and work-in-process inventory is not subject to expiration and the shelf life of finished goods inventory is 36 months from the start of manufacturing of the finished goods. ICLUSIG raw materials and work-in-process inventory is not subject to expiration and finished goods inventory has a shelf life of 24 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 June 30, 2018, there were no entities in which we held a variable interest which we determined to be VIEs.
Long Term Equity Investments	Long Term Equity Investments. Our long term equity investments consist of 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 our 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	Property and Equipment. Property and equipment 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. Management continually reviews the estimated useful lives of technologically sensitive equipment and believes that those estimates appropriately reflect the current useful life of our assets. In the event that a currently unknown significantly advanced technology became commercially available, we would re-evaluate the value and estimated useful lives of our existing equipment, possibly having a material impact on the financial statements.
Lease Accounting	Lease Accounting. We account for operating leases by recording rent expense on a straight-line basis over the expected life of the lease, commencing on the date we gain possession of leased property. We include tenant improvement allowances and rent holidays received from landlords and the effect of any rent escalation clauses to determine the straight-line rent expense over the expected life of the lease. Capital leases are reflected as a liability at the inception of the lease based on the present value of the minimum lease payments or, if lower, the fair value of the property. Assets under capital leases are recorded in property and equipment, net on the condensed consolidated balance sheets and depreciated in a manner similar to other property and equipment.
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, 2017 and determined that the carrying value of our reporting unit 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. In addition, we follow the guidance related to accounting for uncertainty in income taxes. This guidance creates a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before it is recognized in the financial statements.
Financing Costs Related to Long-term Debt	Financing Costs Related to Long-term Debt. Costs associated with obtaining long-term debt are deferred and amortized over the term of the related debt using the effective interest method. Such costs are presented as a direct deduction from the carrying amount of the long-term debt liability, consistent with debt discounts, on the condensed consolidated balance sheets.
Grant Accounting	Grant Accounting. Grant amounts received from government agencies for operations are deferred and are amortized into income over the service period of the grant. Grant amounts received for purchases of capital assets are deferred and amortized into other income (expense), net over the useful life of the related capital assets. Such amounts are recorded in other liabilities on the condensed consolidated balance sheets.
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 shares issuable upon the conversion of convertible debt 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 marketable securities that are classified as available-for-sale, foreign currency translation gains or losses and defined benefit pension obligations. For the year ended December 31, 2017 and interim periods therein, accumulated other comprehensive income (loss) included unrealized gains and losses on our long-term investment classified as available-for-sale in Calithera Biosciences, Inc. Upon adoption of ASU No. 2016-01, we recorded a $2.8 million adjustment to retained earnings as of January 1, 2018 which is further described below under “Recent Accounting Pronouncements.”
Revenue Recognition	Revenue Recognition. The new accounting standard for the recognition of revenue, ASC 606, Revenue from Contracts with Customers, was adopted for the fiscal year beginning on January 1, 2018. Per the new standard, revenue-generating contracts are assessed to identify distinct performance obligations, allocating transaction prices to those performance obligations, and criteria for satisfaction of a performance obligation. The new standard allows for recognition of revenue only 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. The standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time or satisfy the performance obligation at a point in time through analysis of the following criteria: (i) the entity has a present right to payment, (ii) the customer has legal title, (iii) the customer has physical possession, (iv) the customer has the significant risks and rewards of ownership and (v) the customer has accepted the asset. We assess collectability based primarily on the customer’s payment history and on the creditworthiness of the customer. Overall, adoption of the new standard did not significantly alter our methodology for recognition of revenue. Product Revenues Our product revenues consist of U.S. sales of JAKAFI and European sales of ICLUSIG. Product revenues are recognized once we meet the revenue recognition criteria described above. In November 2011, we began shipping JAKAFI to our customers in the U.S., which include specialty pharmacies and wholesalers. In June 2016, we acquired the right to and began shipping ICLUSIG to our customers in the European Union and certain other jurisdictions, which include retail pharmacies, hospital pharmacies and distributors. 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 50% 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. 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. We recognize royalty revenues in the period the sales occur. Cost of Product Revenues Cost of product revenues includes all JAKAFI related product costs as well as ICLUSIG related product costs. The ICLUSIG inventories were recorded at fair value less costs to sell in connection with our June 2016 acquisition of ARIAD Pharmaceuticals (Luxembourg) S.à.r.l., since renamed Incyte Biosciences Luxembourg S.à.r.l. (the “Acquisition”), which resulted in a higher cost of ICLUSIG product revenues over a one year period from the acquisition date. 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. Subsequent to the Acquisition on June 1, 2016, cost of product revenues also includes the amortization of our licensed intellectual property for ICLUSIG using the straight-line method over the estimated useful life of 12.5 years. Contract and License Revenues Our typical customer arrangements, which fall within the scope of ASC 606, Revenue from Contracts with Customers, include distinct drug compound out-licensing, collection of upfront payments, milestones or royalty revenues from a counterparty, and provision of commercially available products to suppliers. Our agreements often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and commercialization events outside of our control, such as regulatory approval of a compound, first patient dosing or achievement of sales-based thresholds. For such cases, we believe that revenue related to these events should not be recognized until the milestone has been achieved. Some contracts form collaborative arrangements of various types with third-parties. We assess whether the nature of the arrangement is within the scope of ASC 808, Collaborative Arrangements, in conjunction with the new revenue guidance to determine the nature of the performance obligations and associated transaction prices. A collaborative relationship may exist when we participate in an activity or process with another party, such as performance of research and development services or the exchange of intellectual property for use in clinical trials, when both parties share in the risks and rewards that result from the activity or participate and govern contract activities through a joint steering committee. The regulatory review and approval process, which includes preclinical testing and clinical trials of each drug candidate, is lengthy, expensive and uncertain. Securing approval by the U.S. Food and Drug Administration (the “FDA”) requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish a drug candidate’s safety and efficacy. The approval process takes many years, requires the expenditure of substantial resources, involves post-marketing surveillance and may involve ongoing requirements for post-marketing studies. Before commencing clinical investigations of a drug candidate in humans, we must submit an Investigational New Drug application (“IND”), which must be reviewed by the FDA. The steps generally required before a drug may be marketed in the United States include preclinical laboratory tests, animal studies and formulation studies, submission to the FDA of an IND for human clinical testing, performance of adequate and well-controlled clinical trials in three phases, as described below, to establish the safety and efficacy of the drug for each indication, submission of a new drug application (“NDA”) or biologics license application (“BLA”) to the FDA for review and FDA approval of the NDA or BLA. Similar requirements exist within foreign regulatory agencies as well. The time required satisfying the FDA requirements or similar requirements of foreign regulatory agencies may vary substantially based on the type, complexity and novelty of the product or the targeted disease. Preclinical testing includes laboratory evaluation of product pharmacology, drug metabolism and toxicity, which includes animal studies, to assess potential safety and efficacy as well as product chemistry, stability, formulation, development, and testing. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND. The FDA may raise safety concerns or questions about the conduct of the clinical trials included in the IND, and any of these concerns or questions must be resolved before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to commence. Clinical trials involve the administration of the investigational drug or the marketed drug to human subjects under the supervision of qualified investigators and in accordance with good clinical practices regulations covering the protection of human subjects. Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Phase I usually involves the initial introduction of the investigational drug into healthy volunteers to evaluate its safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase II usually involves clinical trials in a limited patient population to evaluate dosage tolerance and optimal dosage, identify possible adverse effects and safety risks, and evaluate and gain preliminary evidence of the efficacy of the drug for specific indications. Phase III clinical trials usually further evaluate clinical efficacy and safety by testing the drug in its final form in an expanded patient population, providing statistical evidence of efficacy and safety, and providing an adequate basis for labeling. We cannot guarantee that Phase I, Phase II or Phase III testing will be completed successfully within any specified period of time, if at all. Furthermore, we, the institutional review board for a trial, or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. 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 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. Therefore, as a drug candidate progresses through the stages of its life-cycle, the value of the drug candidate generally increases.
Research and Development Costs	Research and Development Costs. Our policy is to expense research and development costs as incurred. We often contract with clinical 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 at 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.
Acquisition-Related Contingent Consideration	Acquisition-Related Contingent Consideration. Acquisition-related contingent consideration, which consists of our future royalty and certain potential milestone obligations to Takeda Pharmaceutical Company Limited, which acquired ARIAD Pharmaceuticals, Inc. (“Takeda”), is recorded on the acquisition date 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.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which replaced numerous requirements in U.S. GAAP, including industry-specific requirements. This guidance provides a five step model to be applied to all contracts with customers, with an underlying principle that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. We performed an impact assessment which consisted of a review of a representative sample of contracts, discussions with key stakeholders, and cataloging of potential impacts on our financial statements, accounting policies, financial controls, and operations. The guidance did not have a material impact on our revenue recognition practices for product and royalty revenues. The adoption only impacted two areas in our recognition methodology for milestone and contract revenues generated by our collaborative research and license agreements: (i)Changes in the model for distinct licenses of functional intellectual property which may result in a timing difference of revenue recognition. Whereas revenue from these arrangements was previously recognized over a period of time pursuant to revenue recognition guidance that was in place for our arrangements at the time such arrangements commenced, revenue from new arrangements we enter into may now be recognized at a point in time. (ii)Assessments of milestone payments linked to events that are in our control, may result in variable consideration that may be recognized at an earlier point in time, when it is probable that the milestone will be achieved without a significant future reversal of cumulative revenue expected. We adopted the new standard for the fiscal period beginning January 1, 2018, utilizing the “modified retrospective” adoption methodology on all contracts for which performance had not been completed as of the date of adoption, and applied the guidance to report new disclosures surrounding our recognition of revenues. There was no cumulative effect of adopting the standard at the date of initial application in retained earnings. We have implemented a controls process to identify and evaluate all revenue-generating contracts with third-party customers on an on-going basis and have provided enhanced disclosures within this Form 10-Q to provide greater detail on our revenue-generating activities, see Notes 3 and 9. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The standard requires several changes including that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in results of operations. These provisions will not impact the accounting for our investments in corporate debt and U.S. government securities. The new guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. Amendments are to be applied as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this standard resulted in a $2.8 million decrease in our accumulated deficit as of January 1, 2018 related to our investment in Calithera Biosciences, Inc. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” that requires lessees to recognize assets and liabilities on the balance sheet for most leases including operating leases. Lessees will classify leases as either finance or operating leases and lessors classify all leases as sales-type, direct financing or operating leases. The statement of operations presentation and expense recognition for lessees for finance leases is similar to that of capital leases under Accounting Standards Codification (“ASC”) 840 with separate interest and amortization expense with higher periodic expense in the earlier periods of a lease. For operating leases, the statement of operations presentation and expense recognition is similar to that of operating leases under ASC 840 with single lease cost recognized on a straight-line basis. This guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements and is effective for annual periods beginning after December 15, 2018 and interim periods therein. We are currently analyzing the impact of ASU No. 2016-02 and, at this time, are unable to determine the impact of the new standard, on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, “Restricted Cash,” which requires entities to show the changes in total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions on the balance sheet. The reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. We adopted the new standard for the period beginning January 1, 2018. Due to the retrospective adoption of the standard, the cash flows from financing activities for the year ended December 31, 2017 and interim periods therein, no longer present the transfer of restricted investments to cash and cash equivalents. The change in total cash, cash equivalents, restricted cash and investments is now presented in the consolidated statement of cash flows and reconciles to the related captions on the consolidated balance sheet. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other,” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Under the new standard, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The new standard is effective for public business entities that are SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard is to be applied on a prospective basis. We are currently analyzing the impact of ASU No. 2017-04 on our consolidated financial statements. In March 2017, the FASB issued ASU No. 2017-07, “Compensation–Retirement Benefits,” which requires the service cost component of net periodic benefit cost to be presented in the same income statement line as other employee compensation costs arising from services rendered during the period and the other components of net periodic benefit cost to be presented separately from the income statement lines that include service cost and outside of any subtotal of operating income. We adopted the new standard for the period beginning January 1, 2018, resulting in no change in presentation of the service cost component of net periodic benefit cost, which has historically been reported in research and development and selling, general and administrative expenses along with other employee compensation costs. The retrospective adoption resulted in a change in presentation of the other components of net periodic benefit cost for the year ended December 31, 2017, and interim periods therein, which reclassed these costs out of operating income and into other income (expense), net on the consolidated statements of operations. The components of net periodic benefit cost are presented separately within our employee benefit plans footnote. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act of 2017 (the “Act”). In accordance with SAB 118, we recorded provisional tax impacts related to the revaluation of deferred tax assets and liabilities as well as the temporary full expensing of certain business assets in our consolidated financial statements for the year ended December 31, 2017. We continue to monitor and analyze further issued guidance, however no additional tax effects of the Act were required to be recorded for the three and six months ended June 30, 2018. The financial statement impact is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter of 2018, we have elected to treat any potential GILTI inclusions as a period charge in the future period in which it is incurred. We have determined there to be no impact associated with GILTI on our condensed consolidated financial statements as of and for the three and six months ended June 30, 2018. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement – Reporting Comprehensive Income,” which allows reclassification of certain tax effects created as a result of changing methodologies, laws and tax rates legislated in the Act. This new standard allows for stranded income tax effects resulting from the Act to be reclassified into retained earnings to allow for their tax effect to reflect the appropriate tax rate. Due to the full valuation allowance on our U.S. net deferred tax assets, a reclassification of stranded tax effects to retained earnings was not required.

Revenues (Tables)

6 Months Ended

Jun. 30, 2018

Revenues

Revenues

The following table presents our disaggregated revenue for the periods presented.


	For the Three Months Ended,				For the Six Months Ended,
	June 30,				June 30,
	2018		2017		2018		2017
	(in millions)				(in millions)
JAKAFI revenues, net	$	345.6	$	276.0	$	659.3	$	527.1
ICLUSIG revenues, net		19.9		15.7		40.7		29.4
Total product revenues, net		365.5		291.7		700.0		556.5
JAKAVI product royalty revenues		47.1		33.9		88.4		62.7
OLUMIANT product royalty revenues		8.9		0.9		15.3		1.3
Total product royalty revenues		56.0		34.8		103.7		64.0
Milestone revenues		100.0		—		100.0		90.0
Other revenues		—		—		0.1		0.1
Total revenues	$	521.5	$	326.5	$	903.8	$	710.6

Fair value of financial instruments (Tables)

6 Months Ended

Jun. 30, 2018

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)		June 30, 2018
Cash and cash equivalents	$	928,517	$	—	$	—	$	928,517
Debt securities (corporate and government)		—		269,865		—		269,865
Long term investments (Note 9)		131,330		—		—		131,330
Total assets	$	1,059,847	$	269,865	$	—	$	1,329,712


	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, 2017
Cash and cash equivalents	$	899,509	$	—	$	—	$	899,509
Debt securities (corporate and government)		—		270,136		—		270,136
Long term investment (Note 9)		134,356		—		—		134,356
Total assets	$	1,033,865	$	270,136	$	—	$	1,304,001

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 Assets		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2018
Contingent consideration	$	—	$	—	$	288,000	$	288,000
Total liabilities	$	—	$	—	$	288,000	$	288,000


	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, 2017
Contingent consideration	$	—	$	—	$	287,000	$	287,000
Total liabilities	$	—	$	—	$	287,000	$	287,000

Schedule of rollforward of Level 3 liabilities

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


	Level 3
Balance at January 1, 2018	$	287,000
Contingent consideration earned during the period but not yet paid		(6,303)
Payments made during the period		(6,685)
Change in fair value of contingent consideration		13,988
Balance at June 30, 2018	$	288,000

Summary of marketable securities portfolio


			Net		Net
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(in thousands)
June 30, 2018
Debt securities (corporate and government)	$	271,533	$	—	$	(1,668)	$	269,865

December 31, 2017
Debt securities (corporate and government)	$	271,401	$	—	$	(1,265)	$	270,136

Concentration of credit risk (Tables)

6 Months Ended

Jun. 30, 2018

Concentration of credit risk

Schedule of concentration of credit risk related to collaborative partners


	Percentage of Total				Percentage of Total
	Milestone Revenues for the				Milestone Revenues for the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Collaboration Partner A	—	%	—	%	—	%	28	%
Collaboration Partner B	100	%	—	%	100	%	72	%

Schedule of concentration of credit risk related to specialty pharmacy customers


	Percentage of Total Net				Percentage of Total Net
	Product Revenues for the				Product Revenues for the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Customer A	21	%	23	%	21	%	25	%
Customer B	15	%	16	%	14	%	16	%
Customer C	14	%	13	%	14	%	13	%
Customer D	12	%	9	%	11	%	8	%

Inventory (Tables)

6 Months Ended

Jun. 30, 2018

Inventory

Schedule of inventory


	June 30,		December 31,
	2018		2017
	(in thousands)
Raw materials	$	1,119	$	1,062
Work-in-process		5,582		8,615
Finished goods		5,869		4,771
		12,570		14,448
Inventories-current		5,869		6,482
Inventories-non-current	$	6,701	$	7,966

Property and equipment, net (Tables)

6 Months Ended

Jun. 30, 2018

Schedule of property and equipment, net


	June 30,		December 31,
	2018		2017
	(in thousands)
Office equipment	$	16,361	$	14,674
Laboratory equipment		57,409		48,807
Computer equipment		54,191		51,351
Land		5,350		5,350
Building and leasehold improvements		222,063		214,245
		355,374		334,427
Less accumulated depreciation and amortization		(87,788)		(74,664)
Property and equipment, net	$	267,586	$	259,763

Intangible assets and goodwill (Tables)

6 Months Ended

Jun. 30, 2018

Intangible assets and goodwill

Schedule of intangible assets, net

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

Balance at June 30, 2018

Balance at December 31, 2017

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

44,868

226,132

271,000

34,099

236,901

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
		2018		2019		2020		2021		2022		Thereafter
Amortization expense	$	10,767	$	21,536	$	21,536	$	21,536	$	21,536	$	129,221

Stock compensation (Tables)

6 Months Ended

Jun. 30, 2018

Stock compensation

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


	Employee Stock Options								Employee Stock Purchase Plan
	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended				For the Six Months Ended
	June 30,								June 30,
	2018		2017		2018		2017		2018		2017		2018		2017
Average risk-free interest rates	2.71	%	1.56	%	2.47	%	1.79	%	2.52	%	1.38	%	2.50	%	1.31	%
Average expected life (in years)	5.37		5.41		5.50		5.36		0.50		0.50		0.50		0.50
Volatility	46	%	50	%	45	%	49	%	30	%	42	%	51	%	42	%
Weighted-average fair value (in dollars)	28.65		60.44		39.47		52.87		12.11		17.55		16.25		18.80

Schedule of option activity under the 2010 Stock Plan


		Shares Subject to
		Outstanding Options
	Shares Available		Weighted Average
	for Grant	Shares	Exercise Price
Balance at December 31, 2017	3,909,701	11,206,553	$	68.36
Additional authorization	5,000,000	—		—
Options granted	(1,565,286)	1,565,286	$	89.67
Options exercised	—	(844,619)	$	22.03
Options cancelled	244,146	(244,146)	$	100.67
Balance at June 30, 2018	7,588,561	11,683,074	$	73.89

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


		Shares Subject to
	Shares Available	Outstanding Awards
	for Grant	Shares	Grant Date Value
Balance at December 31, 2017	769,202	1,178,660	$	98.88
Additional authorization	1,000,000	—		—
RSUs granted	(322,593)	322,593	$	73.90
PSUs granted	(446,500)	446,500	$	65.76
RSUs cancelled	43,588	(43,588)	$	103.70
RSUs released	—	(176,590)	$	81.70
Balance at June 30, 2018	1,043,697	1,727,575	$	87.29

Schedule of summary of share activity


		Shares Issued
		and Outstanding
Balance at December 31, 2017		211,262,906
Exercise of stock options and issuance under ESPP		997,470
Settlement of employee restricted stock units		148,199
Conversion of convertible senior notes		577
Balance at June 30, 2018		212,409,152

Debt (Tables)

6 Months Ended

Jun. 30, 2018

Debt

Schedule of components of convertible notes

The components of the convertible notes are as follows (in thousands):


				Carrying Amount,
	Interest Rates			June 30,		December 31,
Debt	June 30, 2018		Maturities	2018		2017
0.375% Convertible Senior Notes due 2018	0.375	%	2018	$	7,554		7,393
1.25% Convertible Senior Notes due 2020	1.25	%	2020		17,016		16,608
					24,570		24,001
Less current portion					7,554		7,393
				$	17,016	$	16,608

Schedule of carrying amount and fair value of convertible notes

The carrying amount and fair value of our convertible notes are as follows (in thousands):


	June 30, 2018				December 31, 2017
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
0.375% Convertible Senior Notes due 2018	$	7,554	$	10,137	$	7,393	$	14,129
1.25% Convertible Senior Notes due 2020		17,016		26,138		16,608		35,431
	$	24,570	$	36,275	$	24,001	$	49,560

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21475-112644

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 470
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=64930739&loc=d3e28878-108400

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21538-112644

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21506-112644

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=64930785&loc=d3e28541-108399

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=64930785&loc=d3e28551-108399

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=84159872&loc=d3e21521-112644

+ Details

Employee benefit plans (Tables)

6 Months Ended

Jun. 30, 2018

Employee benefit plans

Schedule of net periodic benefit cost

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Service cost	$	1,032	$	680	$	2,111	$	1,296
Interest cost		68		52		139		98
Expected return on plan assets		(47)		(38)		(97)		(73)
Amortization of prior service cost		45		13		90		25
Amortization of actuarial losses		66		34		132		68
Net periodic benefit cost	$	1,164	$	741	$	2,375	$	1,414

Net income (loss) per share (Tables)

6 Months Ended

Jun. 30, 2018

Net income (loss) per share

Schedule of calculation of net income (loss) per share


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)		2018	2017			2018	2017
Basic Net Income (Loss) Per Share
Basic net income (loss)	$	52,394	$	(12,484)	$	11,254	$	(199,567)
Weighted average common shares outstanding		212,210		205,141		211,945		200,200

Basic net income (loss) per share	$	0.25	$	(0.06)	$	0.05	$	(1.00)

Diluted Net Income (Loss) Per Share
Diluted net income (loss)	$	52,394	$	(12,484)	$	11,254	$	(199,567)
Weighted average common shares outstanding		212,210		205,141		211,945		200,200

Dilutive stock options and RSUs		2,893		—		3,349		—

Weighted average shares used to compute diluted net income (loss) per share		215,103		205,141		215,294		200,200

Diluted net income (loss) per share	$	0.24	$	(0.06)	$	0.05	$	(1.00)

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


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2018	2017	2018	2017
Outstanding stock options and awards	8,079,446	12,085,346	6,732,551	12,085,346
Common shares issuable upon conversion of the 2018 Notes	148,817	149,603	148,817	149,603
Common shares issuable upon conversion of the 2020 Notes	368,939	368,939	368,939	368,939
Total potential common shares excluded from diluted net loss per share computation	8,597,202	12,603,888	7,250,307	12,603,888

Organization and business (Details)	6 Months Ended
Organization and business (Details)	Jun. 30, 2018 segment
Organization and Business
Number of operating segments	1

Summary of significant accounting policies - Narrative 1 (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) item issuer instrument	Dec. 31, 2017 USD ($)
Concentrations of Credit Risk
Number of issuer to which company limits the amount of credit exposure other than US Government guaranteed securities \| issuer	1
Number of financial investment to which company limits the amount of credit exposure other than US Government guaranteed securities \| instrument	1
Accounts Receivable
Allowance for doubtful accounts \| $	$ 0	$ 0
Variable Interest Entities
Number of entities in which variable interest held \| item	0
JAKAFI
Inventory
Shelf life for finished goods inventory, maximum	36 months
ICLUSIG
Inventory
Shelf life for finished goods inventory, maximum	24 months

Summary of significant accounting policies - Narrative 2 (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jan. 01, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue recognition
Percentage of Medicare Part D insurance coverage gap mandate to be funded by manufacturers				50.00%
Recent Accounting Pronouncements
Net income		$ 52,394	$ (12,484)	$ 11,254	$ (199,567)
ASU 2016-01 \| Calithera
Recent Accounting Pronouncements
Net income	$ 2,800
ICLUSIG
Revenue recognition
Amortization period				12 years 6 months

Revenues (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
Revenues (Details) - USD ($) $ in Millions	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues
Total revenues	$ 521.5		$ 903.8
Before topic 606
Revenues
Total revenues		$ 326.5		$ 710.6
Product revenues, net
Revenues
Total revenues	365.5		700.0
Product revenues, net \| Before topic 606
Revenues
Total revenues		291.7		556.5
JAKAFI Product Revenues
Revenues
Total revenues	345.6		659.3
JAKAFI Product Revenues \| Before topic 606
Revenues
Total revenues		276.0		527.1
ICLUSIG Product Revenues
Revenues
Total revenues	19.9		40.7
ICLUSIG Product Revenues \| Before topic 606
Revenues
Total revenues		15.7		29.4
Product royalty revenues
Revenues
Total revenues	56.0		103.7
Product royalty revenues \| Before topic 606
Revenues
Total revenues		34.8		64.0
JAKAFI Royalty Revenues
Revenues
Total revenues	47.1		88.4
JAKAFI Royalty Revenues \| Before topic 606
Revenues
Total revenues		33.9		62.7
OLUMIANT Royalty Revenues
Revenues
Total revenues	8.9		15.3
OLUMIANT Royalty Revenues \| Before topic 606
Revenues
Total revenues		$ 0.9		1.3
Milestone revenues
Revenues
Total revenues	$ 100.0		100.0
Milestone revenues \| Before topic 606
Revenues
Total revenues				90.0
Other revenues
Revenues
Total revenues			$ 0.1
Other revenues \| Before topic 606
Revenues
Total revenues				$ 0.1

Fair value of financial instruments - Fair value on a recurring basis (Details) - USD ($)
$ in Thousands

6 Months Ended

Jun. 30, 2018

Dec. 31, 2017

Assets transfers from Level 1 to Level 2

$ 0

Assets transfers into Level 3

Assets transfers out of Level 3

Liabilities transfers from Level 1 to Level 2

Liabilities transfers from Level 2 to Level 1

Liabilities transfers into Level 3

Liabilities transfers out of Level 3

131,330

$ 134,356

^[1]

Level 3 | Fair Value

288,000

287,000

Recurring | Fair Value

Debt securities (corporate and government)

928,517

899,509

269,865

270,136

131,330

134,356

1,329,712

1,304,001

Contingent consideration

288,000

287,000

288,000

287,000

Recurring | Level 1

928,517

899,509

131,330

134,356

1,059,847

1,033,865

Recurring | Level 2

Debt securities (corporate and government)

269,865

270,136

269,865

270,136

Recurring | Level 3

Contingent consideration

288,000

287,000

Inventories - non -current

$ 288,000

$ 287,000

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

Fair value of financial instruments - Rollforward of Level 3 liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Rollforward of Level 3 liabilities
Change in fair value of contingent consideration	$ 7,303	$ 7,073	$ 13,988	$ 14,429
ARIAD Pharmaceuticals
Rollforward of Level 3 liabilities
Contingent consideration earned during the period but not yet paid	(6,300)
Payments made during the period	(6,700)
Fair Value \| Level 3
Rollforward of Level 3 liabilities
Balance at beginning of period			287,000
Contingent consideration earned during the period but not yet paid			(6,303)
Payments made during the period			(6,685)
Change in fair value of contingent consideration			13,988
Balance at end of period	$ 288,000		$ 288,000

Fair value of financial instruments - Marketable securities portfolio (Details) - Debt securities (corporate and government) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Summary of marketable security portfolio
Amortized Cost	$ 271,533	$ 271,401
Net Unrealized Losses	(1,668)	(1,265)
Estimated Fair Value	$ 269,865	$ 270,136
Minimum
Summary of marketable security portfolio
Contractual maturity dates	12 months
Maximum
Summary of marketable security portfolio
Contractual maturity dates	18 months

Concentration of credit risk (Details)	3 Months Ended		6 Months Ended		12 Months Ended
Concentration of credit risk (Details)	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Milestone Revenues \| Customer Concentration Risk \| Collaboration Partner A
Concentration of risk
Percentage of concentration risk				28.00%
Milestone Revenues \| Customer Concentration Risk \| Collaboration Partner B
Concentration of risk
Percentage of concentration risk	100.00%		100.00%	72.00%
Net Product Revenues \| Customer Concentration Risk \| Customer A
Concentration of risk
Percentage of concentration risk	21.00%	23.00%	21.00%	25.00%
Net Product Revenues \| Customer Concentration Risk \| Customer B
Concentration of risk
Percentage of concentration risk	15.00%	16.00%	14.00%	16.00%
Net Product Revenues \| Customer Concentration Risk \| Customer C
Concentration of risk
Percentage of concentration risk	14.00%	13.00%	14.00%	13.00%
Net Product Revenues \| Customer Concentration Risk \| Customer D
Concentration of risk
Percentage of concentration risk	12.00%	9.00%	11.00%	8.00%
Accounts Receivable \| Credit Concentration Risk \| Collaboration Partner A and B
Concentration of risk
Percentage of concentration risk			50.00%		47.00%
Accounts Receivable \| Credit Concentration Risk \| Customer A, B, C and D
Concentration of risk
Percentage of concentration risk			26.00%		25.00%

Inventory (Details) - USD ($)
$ in Thousands

Jun. 30, 2018

Dec. 31, 2017

Jun. 01, 2016

Raw materials

$ 1,119

$ 1,062

Work-in-process

5,582

8,615

Finished goods

5,869

4,771

Total inventories

12,570

14,448

Inventories - current

5,869

6,482

^[1]

$ 6,701

$ 7,966

^[1]

ICLUSIG

Inventories acquired

$ 4,000

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

Property and equipment, net - Property and equipment, net (Details) - USD ($)
$ in Thousands

Jun. 30, 2018

Dec. 31, 2017

Less accumulated depreciation and amortization

$ 355,374

$ 334,427

(87,788)

(74,664)

Property and Equipment, net

267,586

259,763

^[1]

Office equipment

16,361

14,674

Laboratory equipment

57,409

48,807

Computer equipment

54,191

51,351

Land

Building and leasehold improvements

5,350

$ 222,063

$ 214,245

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

Property and equipment, net - Narrative (Details) - Office Building in Morges, Switzerland - Building and leasehold improvements	1 Months Ended
	Feb. 28, 2018 ft²
Property and equipment, net
Initial term of agreement to rent	15 years
Renewal term of agreement to rent	20 years
Pending Land and Building Acquisition
Property and equipment, net
Square footage	100,000

Intangible assets and goodwill (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Amortization Expense
Remainder of 2018	$ 10,767
2019	21,536
2020	21,536
2021	21,536
2022	21,536
Thereafter	129,221
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	44,868	34,099
Finite-Lived Intangible Assets, Net, Total	$ 226,132	$ 236,901

License agreements - Novartis (Details) $ in Millions	1 Months Ended					3 Months Ended		6 Months Ended		12 Months Ended								104 Months Ended
License agreements - Novartis (Details) $ in Millions	Apr. 30, 2016 USD ($)	Sep. 30, 2014 USD ($)	Jan. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)	Nov. 30, 2009 USD ($) item	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Jun. 30, 2018 USD ($)
License agreements
Revenues						$ 521.5		$ 903.8
Milestone revenues
License agreements
Revenues						100.0		100.0
Novartis
License agreements
Upfront and immediate milestone payment to be received under license agreement					$ 210.0
Upfront payment received under license agreement				$ 150.0
Immediate milestone payment received under license agreement			$ 60.0
Number of deliverables under license agreement \| item					2
Reimbursable costs recorded as deferred revenue				$ 10.9
Reimbursable costs included in accounts receivable						1.3		1.3		$ 1.6								$ 1.3
Research and development expenses reimbursed						0.7	$ 0.8	1.2	$ 1.5
Product royalties in accounts receivable						47.1		47.1		47.7								47.1
Novartis \| Pre-specified Events \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					$ 1,200.0
Novartis \| Development Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone																		132.0
Novartis \| Development Milestones \| Phase III
License agreements
Amount recognized and received for the achievement of a predefined milestone																	$ 50.0
Novartis \| Development Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					174.0
Novartis \| Regulatory Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone																		215.0
Novartis \| Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					495.0
Novartis \| Commercialization Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone																		$ 60.0
Novartis \| Commercialization Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					$ 500.0
Novartis \| LY3009104 \| Development Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone												$ 5.0	$ 7.0	$ 25.0		$ 15.0
Novartis \| GVHD \| Development Milestones \| Phase III
License agreements
Amount recognized and received for the achievement of a predefined milestone										25.0
Novartis \| GVHD \| Development and Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement	$ 75.0
Novartis \| GVHD \| Development and Commercialization Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone											$ 5.0
Novartis \| JAKAFI \| U.S.
License agreements
Royalties payable on net sales						16.9	13.0	27.3	20.8
Novartis \| JAKAFI \| Regulatory Milestones \| Europe
License agreements
Amount recognized and received for the achievement of a predefined milestone											$ 40.0	25.0	60.0		$ 40.0
Novartis \| JAKAFI \| Regulatory Milestones \| JAPAN
License agreements
Amount recognized and received for the achievement of a predefined milestone													$ 25.0
Novartis \| JAKAFI \| Regulatory Milestones \| U.S.
License agreements
Amount recognized and received for the achievement of a predefined milestone																$ 10.0
Novartis \| JAKAVI
License agreements
Revenues						47.1	33.9	$ 88.4	62.7
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		$ 60.0
Novartis \| JAKAVI \| Regulatory Milestones \| JAPAN
License agreements
Amount recognized and received for the achievement of a predefined milestone												15.0
Novartis \| JAKAVI \| Commercialization Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone										40.0		20.0
Revenues										$ 600.0		$ 300.0
Novartis \| Milestone revenues
License agreements
Revenues						$ 0.0	$ 0.0	$ 0.0	$ 25.0

License agreements - Lilly (Details) $ in Thousands	1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended				103 Months Ended
License agreements - Lilly (Details) $ in Thousands	Mar. 31, 2016 USD ($)	Jul. 31, 2010	Dec. 31, 2009 USD ($) item	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2010 USD ($)	Jun. 30, 2018 USD ($)
License agreements
Research and Development Expense				$ 298,089	$ 201,786	$ 601,192	$ 609,706
Revenues				521,500		903,800
Milestone revenues
License agreements
Revenues				100,000		100,000
Product royalty revenues
License agreements
Revenues				56,000		103,700
Eli Lilly
License agreements
Upfront payment received under license agreement			$ 90,000
Research and Development Expense				14,200	8,700	26,700	18,100
Number of deliverables under license agreement \| item			2
Product royalties in accounts receivable				$ 8,900		$ 8,900		$ 4,600				$ 8,900
Eli Lilly \| Maximum
License agreements
Associated future royalty payments from the initiation of a Phase IIb trial, if elected to not co-develop, percentage						20.00%
Eli Lilly \| Phase IIB
License agreements
Funding of future development costs (as a percent)		30.00%		30.00%		30.00%
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								30,000				129,000
Eli Lilly \| Development Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			150,000
Eli Lilly \| Development Milestones \| Phase III
License agreements
Amount recognized and received for the achievement of a predefined milestone										$ 50,000
Eli Lilly \| Development Milestones \| Phase IIA
License agreements
Amount recognized and received for the achievement of a predefined milestone											$ 30,000
Eli Lilly \| Development Milestones \| Phase IIB
License agreements
Amount recognized and received for the achievement of a predefined milestone											$ 19,000
Eli Lilly \| Regulatory Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone				$ 100,000								$ 235,000
Eli Lilly \| Regulatory Milestones \| JAPAN
License agreements
Amount recognized and received for the achievement of a predefined milestone								15,000
Eli Lilly \| Regulatory Milestones \| U.S.
License agreements
Amount recognized and received for the achievement of a predefined milestone									$ 35,000
Eli Lilly \| Regulatory Milestones \| Europe
License agreements
Amount recognized and received for the achievement of a predefined milestone								$ 65,000	$ 20,000
Eli Lilly \| Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			365,000
Eli Lilly \| Commercialization Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement			$ 150,000
Eli Lilly \| GVHD
License agreements
Upfront payment under license agreement	$ 35,000
Additional milestone payments under the license agreement	$ 40,000
Eli Lilly \| Milestone revenues
License agreements
Revenues				100,000	0	$ 100,000	65,000
Eli Lilly \| Product royalty revenues
License agreements
Revenues				$ 8,900	$ 900	$ 15,300	$ 1,300

License agreements - Agenus (Details)
$ / shares in Units, $ in Thousands, shares in Millions

1 Months Ended

3 Months Ended

6 Months Ended

12 Months Ended

Feb. 14, 2017

USD ($)

$ / shares

Feb. 01, 2017

USD ($)

$ / shares

Feb. 28, 2017

USD ($)

Nov. 30, 2015

item

Feb. 28, 2015

Jan. 31, 2015

item

Jun. 30, 2018

USD ($)

Mar. 31, 2018

USD ($)

Jun. 30, 2017

USD ($)

Jun. 30, 2018

USD ($)

Jun. 30, 2017

USD ($)

Dec. 31, 2017

USD ($)

$ 131,330

$ 134,356

^[1]

298,089

$ 201,786

601,192

$ 609,706

(34,641)

(19,574)

(11,962)

(25,388)

928,517

$ 928,517

899,509

^[1]

Agenus

Number of program targets | item

Royalty payments on future global net sales (as a percent)

15.00%

Period of notice for termination of license agreement

12 months

Agenus | Development, Regulatory and Commercialization Milestones | Minimum

Royalty payments on future global net sales (as a percent)

6.00%

Agenus | Development, Regulatory and Commercialization Milestones | Maximum

Royalty payments on future global net sales (as a percent)

12.00%

Additional milestone payments under the license agreement

$ 510,000

Agenus | Development Milestones

Upfront payment under license agreement

20,000

Additional milestone payments under the license agreement

5,000

$ 5,000

Agenus

40,300

57,900

Shares owned following stock purchase (as a percent)

$ 900

11,200

$ 2,800

18,900

11.00%

9.00%

17.00%

$ (43,300)

4,400

$ (17,600)

(3,300)

Total revenues

$ 1,600

Net income (loss)

54,300

Agenus | Accrued and other liabilities

52,300

Operating expenses

$ 43,400

Agenus | Stock purchase agreement

$ 900

$ 3,200

Purchase of common stock under Stock Purchase Agreement (in shares ) | shares

10.0

$ 60,000

Discount for lack of marketability

$ 4.40

$ 6.00

$ 4,500

Fair value of shares on the issuance date

39,500

Total consideration paid

$ 60,000

$ 39,500

39,500

$ 20,500

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

License agreements - Merus (Details)
$ / shares in Units, $ in Thousands, € in Millions, shares in Millions

1 Months Ended

3 Months Ended

6 Months Ended

12 Months Ended

Jan. 23, 2017

USD ($)

$ / shares

Feb. 28, 2017

USD ($)

Jan. 31, 2017

USD ($)

item

Dec. 31, 2016

USD ($)

$ / shares

Jun. 30, 2018

USD ($)

Jun. 30, 2017

USD ($)

Jun. 30, 2018

USD ($)

Jun. 30, 2017

USD ($)

Dec. 31, 2017

EUR (€)

Dec. 31, 2017

USD ($)

$ 131,330

$ 134,356

^[1]

298,089

$ 201,786

601,192

$ 609,706

(34,641)

(19,574)

(11,962)

(25,388)

Merus

Number of independent programs | item

Number of preclinical discovery programs | item

Number of programs under the resulting products are co-funded for development | item

Associated future global development costs , if elected to co-develop (as a percent)

35.00%

Upfront payment under license agreement

$ 120,000

Merus | U.S.

Profit sharing (as a percent)

50.00%

Percentage of profit (losses)

50.00%

Merus | Minimum

Royalty payments on future global net sales (as a percent)

6.00%

Merus | Minimum | Non-U.S.

Royalty payments on future global net sales (as a percent)

6.00%

Merus | Maximum

Number of additional preclinical discovery programs | item

Royalty payments on future global net sales (as a percent)

10.00%

Percentage of additional royalties

4.00%

Percentage of reverse royalty

4.00%

Merus | Maximum | Non-U.S.

Royalty payments on future global net sales (as a percent)

10.00%

Merus | Maximum | Development and Regulatory Milestones

Additional milestone payments under the license agreement

$ 100,000

Merus | Maximum | Commercialization Milestones

Additional milestone payments under the license agreement

$ 250,000

Merus

Per share price of common stock | $ / shares

$ 24.50

Discount for lack of marketability

$ 5,600

Fair value of shares on the issuance date

72,800

Total consideration paid

80,000

72,800

Fair market value of our long term investments

$ 7,200

2,800

1,500

5,200

2,600

$ 72,800

62,100

14.00%

Merus | Accrued and other liabilities

$ 13,500

$ (23,900)

$ 10,800

$ (22,000)

Total revenues | €

€ 13.6

Net income (loss) | €

€ (73.0)

Merus | Stock purchase agreement

$ 2,400

$ 2,100

Purchase of common stock under Stock Purchase Agreement (in shares ) | shares

3.2

$ 80,000

Percentage of total shares allowed to sell during any 12-month period (as a percent)

$ 25.00

Lock-up period

18 months

Standstill period

3 years

33.00%

Percentage of total shares allowed to sell during any three-month period (as a percent)

10.00%

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

License agreements - Calithera (Details) - USD ($)
$ / shares in Units, $ in Thousands, shares in Millions

1 Months Ended

3 Months Ended

6 Months Ended

Jan. 01, 2018

Jan. 30, 2017

Mar. 31, 2017

Jan. 31, 2017

Jun. 30, 2018

Jun. 30, 2017

Jun. 30, 2018

Jun. 30, 2017

Dec. 31, 2017

Jan. 01, 2017

$ 131,330

$ 134,356

^[1]

298,089

$ 201,786

601,192

$ 609,706

Net income

52,394

(12,484)

11,254

(199,567)

(34,641)

(19,574)

(11,962)

(25,388)

Calithera

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 in effect

430,000

Potential milestone payments to be made with profit sharing terminated

$ 750,000

Milestone payment made under license agreement

$ 12,000

Calithera | Accrued and other liabilities

3,200

2,000

5,800

3,600

2,800

Calithera | U.S.

Percentage of profit (losses)

60.00%

Calithera

Milestone payment made under license agreement

$ 12,000

Total consideration paid

$ 53,000

$ 8,600

14,400

Calithera | Other Comprehensive Income

5.00%

Calithera | Calithera | Accrued and other liabilities

$ (2,200)

5,700

$ (5,800)

13,900

Calithera | Stock purchase agreement

$ 900

Purchase of common stock under Stock Purchase Agreement (in shares )

1.7

Fair market value of our long term investments

$ 8,000

Per share price

$ 6.75

$ 4.65

$ 11,600

Stock purchase price

$ 8,000

$ 11,600

11,600

Calithera | Collaboration and license agreement

$ 41,400

Upfront license fees

$ 45,000

Calithera | ASU 2016-01

Net income

$ 2,800

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

License agreements - MacroGenics (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
License agreements
Research and development		$ 298,089	$ 201,786	$ 601,192	$ 609,706
MacroGenics
License agreements
Upfront payment under license agreement	$ 150,000
Research and development		10,900		17,400
MacroGenics \| Accrued and other liabilities
License agreements
Accrued and other liabilities	$ 1,100	$ 17,500		$ 17,500
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 \| Maximum \| MacroGenics
License agreements
Additional milestone payments under the license agreement	$ 420,000
Commercialization Milestones \| Minimum \| 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

6 Months Ended

Jan. 31, 2018

USD ($)

item

$ / shares

Jun. 30, 2018

USD ($)

Jun. 30, 2017

USD ($)

Jun. 30, 2018

USD ($)

Jun. 30, 2017

USD ($)

Feb. 28, 2018

USD ($)

Jan. 08, 2018

$ / shares

Dec. 31, 2017

USD ($)

^[1]

$ 131,330

$ 134,356

298,089

$ 201,786

601,192

$ 609,706

Syros Pharmaceuticals, Inc.

(34,641)

$ (19,574)

(11,962)

$ (25,388)

Number of program targets | item

Upfront payment under license agreement

$ 10,000

$ 9,600

3.00%

Syros Pharmaceuticals, Inc. | Stock purchase agreement

$ (2,600)

$ 600

Purchase of common stock under Stock Purchase Agreement (in shares ) | shares

0.8

$ 10,000

Discount for lack of marketability

$ 12.61

$ 9.77

Lock-up period

12 months

$ 100

Fair value of shares on the issuance date

7,600

7,600

Syros Pharmaceuticals, Inc. | Amended stock purchase agreement

$ 2,400

Purchase of common stock under Stock Purchase Agreement (in shares ) | shares

0.1

$ 1,400

$ 9.55

Syros Pharmaceuticals, Inc. | Maximum

$ 1,400

Target selection and option exercise fee payment

$ 54,000

Syros Pharmaceuticals, Inc. | Development and Regulatory Milestones | Maximum

Additional milestone payments under the license agreement

50,000

Syros Pharmaceuticals, Inc. | Commercialization Milestones | Maximum

Additional milestone payments under the license agreement

$ 65,000

[1]	The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

Stock compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Stock compensation
Stock compensation expense	$ 36.6	$ 33.8	$ 72.8	$ 64.4
Weighted-average fair value assumptions
Valuation method			Black-Scholes valuation model
Dividend yield (as a percent)			0.00%
Research and Development Expense [Member]
Stock compensation
Stock compensation expense	24.8	22.9	$ 49.0	44.4
Selling, General and Administrative Expenses [Member]
Stock compensation
Stock compensation expense	$ 11.8	$ 10.9	$ 23.8	$ 20.0
Stock Options
Weighted-average fair value assumptions
Average risk-free interest rates (as a percent)	2.71%	1.56%	2.47%	1.79%
Average expected life (in years)	5 years 4 months 13 days	5 years 4 months 28 days	5 years 6 months	5 years 4 months 10 days
Volatility (as a percent)	46.00%	50.00%	45.00%	49.00%
Weighted-average fair value (in dollars per share)	$ 28.65	$ 60.44	$ 39.47	$ 52.87
Restricted Stock Units (RSUs)
Weighted-average fair value assumptions
Average risk-free interest rates (as a percent)	2.52%	1.38%	2.50%	1.31%
Average expected life (in years)	6 months	6 months	6 months	6 months
Volatility (as a percent)	30.00%	42.00%	51.00%	42.00%
Weighted-average fair value (in dollars per share)	$ 12.11	$ 17.55	$ 16.25	$ 18.80

Stock compensation - Option activity (Details) - Stock Options - $ / shares	1 Months Ended	6 Months Ended
	Jul. 31, 2016	Jun. 30, 2018	Jun. 30, 2016
Shares Available For Grant
Outstanding at the beginning of the period (in shares)		3,909,701
Additional authorization (in shares)		5,000,000
Options granted (in shares)		(1,565,286)
Options cancelled (in shares)		244,146
Outstanding at the end of the period (in shares)		7,588,561
Shares Subject to Outstanding Options, Shares
Outstanding at the beginning of the period (in shares)		11,206,553
Options granted (in shares)		1,565,286
Options exercised (in shares)		(844,619)
Options cancelled (in shares)		(244,146)
Outstanding at the end of the period (in shares)		11,683,074
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)		$ 68.36
Options granted (in dollars per share)		89.67
Options exercised (in dollars per share)		22.03
Options cancelled (in dollars per share)		100.67
Outstanding at the end of the period (in dollars per share)		$ 73.89
Termination period	10 years		7 years
Vesting period	4 years		3 years
Vesting after one year
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Vesting period	1 year		1 year
Vesting Percentage	25.00%		33.00%
Remainder vesting
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	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Restricted Stock Units (RSUs)
Shares Available For Grant
Shares Available for Grant Beginning Balance (in shares)		769,202
Additional authorization (in shares)		1,000,000
Granted (in shares)		(322,593)
Cancelled (in shares)		43,588
Shares Available for Grant Ending Balance (in shares)	1,043,697	1,043,697
Shares Subject to Outstanding Options, Shares
Outstanding at the beginning of the period (in shares)		1,178,660
Granted (in shares)	190,000,000	322,593
Cancelled (in shares)		(43,588)
Released (in shares)		(176,590)
Outstanding at the end of the period (in shares)	1,727,575	1,727,575
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)		$ 98.88
Granted (in dollars per share)		73.90
Cancelled (in dollars per share)		103.70
Released (in dollars per share)		81.70
Outstanding at the end of the period (in dollars per share)	$ 87.29	$ 87.29
Performance Stock Units (PSUs)
Shares Available For Grant
Granted (in shares)		(446,500)
Shares Subject to Outstanding Options, Shares
Granted (in shares)	446,500,000	446,500
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Granted (in dollars per share)		$ 65.76

Stock compensation - RSU and PSU Narrative (Details) - USD ($) $ in Millions	1 Months Ended			6 Months Ended
	Jun. 30, 2018	Jul. 31, 2016	Jan. 31, 2014	Jun. 30, 2018	Jun. 30, 2016	Dec. 31, 2017
Stock Compensation Plans
Assumed annualized forfeiture rate (as a percent)				5.00%
Stock Options
Stock Compensation Plans
Vesting period		4 years			3 years
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 100.5			$ 100.5
Vesting period of recognition of the unrecognized compensation cost of nonvested awards				1 year 7 months 6 days
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)	190,000,000			322,593
Outstanding (in shares)	1,043,697			1,043,697		769,202
Service period					3 years
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 53.9			$ 53.9
Vesting period of recognition of the unrecognized compensation cost of nonvested awards				1 year 6 months
Restricted Stock Units (RSUs) \| President And Chief Executive Officer
Stock Compensation Plans
Percentage of units vesting at the end of each calendar year (as a percent)				16.70%
Granted (in shares)			400,000
Vested (in shares)				266,667
Outstanding (in shares)	133,333			133,333
Performance Stock Units (PSUs)
Stock Compensation Plans
Granted (in shares)	446,500,000			446,500
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 26.7			$ 26.7
Performance Stock Units (PSUs) \| Maximum
Stock Compensation Plans
Service period	4 years
Performance Stock Units (PSUs) \| Minimum
Stock Compensation Plans
Service period	3 years
Performance Stock Units (PSUs) \| Long term incentive plan
Stock Compensation Plans
Granted (in shares)	106,500,000
Performance Stock Units (PSUs) \| Long term incentive plan \| Maximum
Stock Compensation Plans
Multiplying factor	267.00%

Stock compensation - Share activity (Details)	6 Months Ended
Stock compensation - Share activity (Details)	Jun. 30, 2018 shares
Stock compensation
Beginning balance, Shares outstanding	211,262,906
Exercise of stock options and issuance under ESPP	997,470
Settlement of employee restricted stock units and performance shares	148,199
Conversion of convertible senior notes	577
Ending balance, Shares outstanding	212,409,152

Debt - Components of convertible notes (Details) - USD ($)
$ in Thousands

Jun. 30, 2018

Dec. 31, 2017

Jun. 30, 2017

Convertible senior notes noncurrent

Less current portion

$ 7,554

$ 7,393

^[1]

17,016

16,608

^[1]

Carrying Amount

Convertible senior notes, total

24,570

24,001

Less current portion

7,554

7,393

Convertible senior notes noncurrent

$ 17,016

16,608

Convertible Senior Notes 0.375 Percent Due 2018

Interest rate of debt (as a percent)

0.375%

Convertible Senior Notes 0.375 Percent Due 2018 | Carrying Amount

Convertible senior notes, total

$ 7,554

7,393

Convertible Senior Notes 1.25 Percent Due 2020

Interest rate of debt (as a percent)

1.25%

Convertible Senior Notes 1.25 Percent Due 2020 | Carrying Amount