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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2019	Jul. 23, 2019
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2019
Entity File Number	001-12400
Entity Registrant Name	INCYTE CORP
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-3136539
Entity Address, Address Line One	1801 Augustine Cut-Off
Entity Address, City or Town	Wilmington
Entity Address, State or Province	DE
Entity Address, Postal Zip Code	19803
City Area Code	302
Local Phone Number	498-6700
Title of 12(b) Security	Common Stock, $.001 par value per share
Trading Symbol	INCY
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		215,066,629
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000879169
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 1,416,224	$ 1,163,980
Marketable securities-available-for-sale	279,631	274,343
Accounts receivable	302,680	307,598
Inventory	6,527	6,967
Prepaid expenses and other current assets	53,563	79,366
Total current assets	2,058,625	1,832,254
Restricted cash and investments	1,014	1,006
Long term investments	115,563	99,199
Inventory	6,166	3,438
Property and equipment, net	339,122	319,751
Finance lease right-of use assets, net	30,348
Other intangible assets, net	204,596	215,364
Goodwill	155,593	155,593
Other assets, net	36,606	19,157
Total assets	2,947,633	2,645,762
Current liabilities:
Accounts payable	66,184	103,827
Accrued compensation	53,697	60,176
Interest payable	30	29
Accrued and other current liabilities	210,474	229,401
Finance lease liabilities	791
Acquisition-related contingent consideration	35,929	31,844
Total current liabilities	367,105	425,277
Convertible senior notes	17,862	17,434
Acquisition-related contingent consideration	250,071	255,157
Finance lease liabilities	31,643
Other liabilities	33,761	21,927
Total liabilities	700,442	719,795
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding as of June 30, 2019 and December 31, 2018
Common stock, $0.001 par value; 400,000,000 shares authorized; 214,865,720 and 213,274,660 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	215	213
Additional paid-in capital	3,925,975	3,813,678
Accumulated other comprehensive loss	(8,965)	(10,165)
Accumulated deficit	(1,670,034)	(1,877,759)
Total stockholders' equity	2,247,191	1,925,967
Total liabilities and stockholders' equity	$ 2,947,633	$ 2,645,762

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
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	214,865,720	213,274,660
Common stock, shares outstanding	214,865,720	213,274,660

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues:
Total revenues	$ 529,932	$ 521,516	$ 1,027,789	$ 903,798
Costs and expenses:
Cost of product revenues (including definite-lived intangible amortization)	29,406	24,856	51,994	42,962
Research and development	289,363	298,089	559,908	601,192
Selling, general and administrative	105,943	108,029	229,926	229,527
Change in fair value of acquisition-related contingent consideration	6,608	7,303	13,279	13,988
Total costs and expenses	431,320	438,277	855,107	887,669
Income from operations	98,612	83,239	172,682	16,129
Other income (expense), net	15,000	5,808	24,373	10,270
Interest expense	(316)	(398)	(651)	(783)
Unrealized gain (loss) on long term investments	(4,625)	(34,641)	16,364	(11,962)
Income before provision for income taxes	108,671	54,008	212,768	13,654
Provision for income taxes	3,353	1,614	5,138	2,400
Net income	$ 105,318	$ 52,394	$ 207,630	$ 11,254
Net income per share:
Basic	$ 0.49	$ 0.25	$ 0.97	$ 0.05
Diluted	$ 0.48	$ 0.24	$ 0.96	$ 0.05
Shares used in computing net income (loss) per share:
Basic	214,620	212,210	214,342	211,945
Diluted	217,483	215,103	217,274	215,294
Product revenues, net
Revenues:
Total revenues	$ 433,897	$ 365,524	$ 830,146	$ 700,029
Product royalty revenues
Revenues:
Total revenues	76,035	55,953	137,643	103,669
Other revenues
Revenues:
Total revenues		39		100
Milestone revenues
Revenues:
Total revenues	$ 20,000	$ 100,000	$ 60,000	$ 100,000

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 105,318	$ 52,394	$ 207,630	$ 11,254
Other comprehensive income (loss):
Foreign currency translation	(284)	100	(158)	135
Unrealized gain (loss) on marketable securities, net of tax	458	102	1,139	(403)
Defined benefit pension obligations, net of tax	108	111	219	222
Other comprehensive income (loss)	282	313	1,200	(46)
Comprehensive income	$ 105,600	$ 52,707	$ 208,830	$ 11,208

- Definition

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

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Increase (Decrease) in Stockholders' Equity
Adoption of ASU \| ASU 2016-01			$ (2,753)	$ 2,753
Balances at Dec. 31, 2017	$ 211	$ 3,627,433	(7,010)	(1,990,005)	$ 1,630,629
Increase (Decrease) in Stockholders' Equity
Issuance of shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units	1	2,575			2,576
Issuance of shares of Common Stock for services rendered		87			87
Issuance of shares of Common Stock upon conversion of Convertible Senior Notes		27			27
Stock compensation		36,224			36,224
Other comprehensive income (loss)			(359)		(359)
Net income				(41,140)	(41,140)
Balances at Mar. 31, 2018	212	3,666,346	(10,122)	(2,028,392)	1,628,044
Balances at Dec. 31, 2017	211	3,627,433	(7,010)	(1,990,005)	1,630,629
Increase (Decrease) in Stockholders' Equity
Other comprehensive income (loss)					(46)
Net income					11,254
Balances at Jun. 30, 2018	212	3,718,518	(9,809)	(1,975,998)	1,732,923
Balances at Mar. 31, 2018	212	3,666,346	(10,122)	(2,028,392)	1,628,044
Increase (Decrease) in Stockholders' Equity
Issuance of shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units		15,480			15,480
Issuance of shares of Common Stock for services rendered		85			85
Issuance of shares of Common Stock upon conversion of Convertible Senior Notes		2			2
Stock compensation		36,605			36,605
Other comprehensive income (loss)			313		313
Net income				52,394	52,394
Balances at Jun. 30, 2018	212	3,718,518	(9,809)	(1,975,998)	1,732,923
Increase (Decrease) in Stockholders' Equity
Adoption of ASU \| ASU No. 2016-02				95	95
Balances at Dec. 31, 2018	213	3,813,678	(10,165)	(1,877,759)	1,925,967
Increase (Decrease) in Stockholders' Equity
Issuance of shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units	1	15,480			15,481
Issuance of shares of Common Stock for services rendered		104			104
Stock compensation		40,690			40,690
Other comprehensive income (loss)			918		918
Net income				102,312	102,312
Balances at Mar. 31, 2019	214	3,869,952	(9,247)	(1,775,352)	2,085,567
Balances at Dec. 31, 2018	213	3,813,678	(10,165)	(1,877,759)	1,925,967
Increase (Decrease) in Stockholders' Equity
Other comprehensive income (loss)					1,200
Net income					207,630
Balances at Jun. 30, 2019	215	3,925,975	(8,965)	(1,670,034)	2,247,191
Balances at Mar. 31, 2019	214	3,869,952	(9,247)	(1,775,352)	2,085,567
Increase (Decrease) in Stockholders' Equity
Issuance of shares of Common Stock upon exercise of stock options and settlement of employee restricted stock units	1	15,190			15,191
Issuance of shares of Common Stock for services rendered		123			123
Stock compensation		40,710			40,710
Other comprehensive income (loss)			282		282
Net income				105,318	105,318
Balances at Jun. 30, 2019	$ 215	$ 3,925,975	$ (8,965)	$ (1,670,034)	$ 2,247,191

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Issuance of shares of Common Stock upon exercise of stock options and restricted stock units	400,292	1,044,745	369,109	623,709
Issuance of shares of Common Stock under the ESPP	143,379		150,538
Issuance of shares of Common Stock for services rendered	1,444	1,200	1,281	1,032
Convertible Senior Notes 0.375 Percent Due 2018
Issuance of shares of Common Stock upon conversion of convertible senior notes			38	539

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net income (loss)	$ 207,630	$ 11,254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27,326	26,925
Stock-based compensation	81,207	72,829
Other, net	227	172
Unrealized (gain) loss on long term investments	(16,364)	11,962
Change in fair value of acquisition-related contingent consideration	13,279	13,988
Changes in operating assets and liabilities:
Accounts receivable	4,918	(50,011)
Prepaid expenses and other assets	8,354	(23,589)
Inventory	(2,288)	1,878
Accounts payable	(32,243)	7,888
Accrued and other liabilities	16,577	(20,055)
Net cash provided by operating activities	308,623	53,241
Cash flows from investing activities:
Purchase of long term investments		(8,936)
Capital expenditures	(65,561)	(23,381)
Purchases of marketable securities	(103,970)	(58,827)
Sale and maturities of marketable securities	99,821	58,694
Net cash used in investing activities	(69,710)	(32,450)
Cash flows from financing activities:
Proceeds from issuance of common stock under stock plans	30,672	18,043
Payment of finance lease liabilities	(409)
Payment of contingent consideration	(16,766)	(9,886)
Net cash provided by financing activities	13,497	8,157
Effect of exchange rates on cash, cash equivalents, restricted cash and investments	(158)	135
Net increase in cash, cash equivalents, restricted cash and investments	252,252	29,083
Cash, cash equivalents, restricted cash and investments at beginning of period	1,164,986	900,434
Cash, cash equivalents, restricted cash and investments at end of period	1,417,238	929,517
Supplemental Schedule of Cash Flow Information
Interest paid	119	134
Income taxes paid	6,439	1,944
Leased assets obtained in exchange for new operating lease liabilities	2,358
Leased assets obtained in exchange for new finance lease liabilities	$ 29,740
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 of 0.375% convertible senior notes due 2018		$ 29

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

Organization and business

6 Months Ended

Jun. 30, 2019

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

Jun. 30, 2019

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, 2019, the condensed consolidated statements of operations, comprehensive income, and stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 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, 2018 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, 2018.

Principles of Consolidation. The condensed consolidated financial statements include the accounts of Incyte Corporation and our wholly owned subsidiaries. All inter-company accounts, transactions, and profits have been eliminated in consolidation.

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

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Concentrations of Credit Risk. Cash, cash equivalents, marketable securities, and trade receivables are financial instruments which potentially subject us to concentrations of credit risk. The estimated fair value of financial instruments approximates the carrying value based on available market information. 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, 2019 and December 31, 2018, we had a de minimis 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, 2019, there were no entities in which we held a variable interest which we determined to be VIEs.

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

In assessing whether we exercise significant influence over any of the companies in which we hold equity investments, we consider the nature and magnitude of our investment, any voting and protective rights we hold, any participation in the governance of the other company, and other relevant factors such as the presence of a collaboration or

other business relationship. Currently, none of our equity investments in publicly-held companies are considered relationships in which we are able to assert control.

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

Lease Accounting. The new accounting standard for leases, Accounting Standard Codification (“ASC”) 842, Leases, was adopted for the fiscal year beginning on January 1, 2019. Per the new standard, all leases with a lease term greater than 12 months, regardless of lease type classification, are recorded as an obligation on the balance sheet with a corresponding right-of-use asset. Under the prior leasing standard, only contracts assessed as capital leases were recorded on the balance sheet. Both finance and operating leases are reflected as liabilities on the commencement date of the lease based on the present value of the lease payments to be made over the lease term. Current operating lease liabilities are reflected in accrued and other current liabilities and noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheet. Right-of-use assets are valued at the initial measurement of the lease liability, plus any initial direct costs or rent prepayments, minus lease incentives and deferred lease payments, and are amortized over the lease term. Operating right-of-use assets are recorded in property and equipment, net on the condensed consolidated balance sheet. For operating leases, the expense recognition is similar to that of operating leases under ASC 840, with a single lease cost recognized on a straight-line basis. For finance leases, the expense recognition is similar to that of capital leases under ASC 840, with separate amortization and interest expense, with higher interest expense in the earlier periods of a lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the term of the lease.

In determining whether a contract contains a lease, asset and service agreements are assessed at onset and upon modification for criteria of specifically identified assets, control and economic benefit.

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

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

Goodwill. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually as of October 1 or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts. A reporting unit is the same as, or one level below, an operating segment. Our operations are currently comprised of a single, entity wide reporting unit. We completed our most recent annual impairment assessment as of October 1, 2018 and determined that the carrying value of our goodwill was not impaired.

Income Taxes. We account for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts reportable for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

We recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes,

based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any interest and penalties on uncertain tax positions are included within the tax provision.

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, performance 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.

Revenue Recognition. 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. Revenue is recognized when we have satisfied a performance obligation through transferring control of the promised good or service to a customer. Control, in this instance, may mean the ability to prevent other entities from directing the use of, and receiving benefit from, a good or service. We determine at contract inception whether we 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.

Product Revenues

Our product revenues consist of U.S. sales of JAKAFI and European sales of ICLUSIG. Product revenues are recognized once we satisfy the performance obligation at a point in time under the revenue recognition criteria as 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. At June 30, 2019 and December 31, 2018, $60.9 million and $44.8 million, respectively, of accrued sales allowances were included in accrued and other current liabilities on the condensed consolidated balance sheets. Product shipping and handling costs are included in cost of product revenues.

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

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

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

Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment.

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 acquired 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”). 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.

Milestone and Contract Revenues

Our license agreements, 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 as of the end of each reporting period. Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting.

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

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 (“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 February 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 842, Leases, that requires lessees to recognize assets and liabilities on the balance sheet for most leases including operating leases. Additionally, the FASB issued clarifying guidance to the topic in ASUs No. 2018-10, No. 2018-11, No. 2018-20 and No. 2019-01 which clarified certain aspects of the new leases standard and provided an optional transition method. The guidance requires that the lessees classify leases as either a finance or operating lease 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 ASC 840, with separate interest and amortization expense with higher interest 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 a single lease cost recognized on a straight-line basis. We implemented a third-party information technology application to facilitate activities for the new accounting and disclosure requirements and implemented new internal control procedures to support the new accounting and reporting processes associated with adopting the guidance. We elected the package of practical expedients and adopted utilizing the optional transition method as defined within ASU No. 2018-11. Accordingly, prior periods will not be restated to reflect the adopted standard. We did not elect the hindsight expedient.

As a result of adoption on January 1, 2019, we recorded $23.6 million of lease right-of-use assets, $23.7 million of lease liabilities and an adjustment to retained earnings of $0.1 million. In addition, our capital lease assets and liabilities are now classified as finance lease right-of-use assets and liabilities. The capital asset and financing liability of $18.7 million recorded in 2018 related to the Morges office building and construction, described more fully in Note 7, was derecognized upon adoption. The adoption of the standard did not materially impact our consolidated net income and had no impact on our consolidated cash flows.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This guidance applies to all entities and impacts how entities account for credit losses for most financial assets and other instruments. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. The FASB released clarifying guidance in April 2019 within ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses,” and in May 2019 within ASU No. 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief.” The updates provide guidance on estimating credit losses, including transition relief by allowing for election of the fair value methodology on an instrument-by-instrument basis for eligible financial instruments within the scope of ASC 825-10. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods therein. Elections under ASU 2019-05 require a modified retrospective application through a cumulative-effect adjustment in the opening balance of retained earnings upon adoption. We are currently analyzing the impact of the ASUs on our condensed consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This guidance expanded the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services and supersedes the guidance in ASC 505-50. Under this new standard, nonemployee awards are measured on the grant date by estimating the fair value of the equity instruments to be issued rather than the fair value of the goods or services received. Entities may use the expected term when estimating the fair value of a nonemployee option or elect to use the contractual term as the expected term, on an award-by-award basis. The cumulative effect of the transition adjustment is to be recorded as an adjustment to retained earnings as of the beginning of the annual period of adoption. We adopted this standard for the period beginning January 1, 2019 and concluded there to be no change in our previous accounting for nonemployee awards and no impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General,” an update to Subtopic ASC 715-20. The guidance amended year-end disclosure requirements related to defined benefit pension plans, and does not affect interim disclosures. The guidance is effective for fiscal years ending after December 15, 2020, and is permitted for early adoption. The standard is to be applied on a retrospective basis. Incyte

sponsors defined benefit plans for employees located in Europe. We are currently analyzing the impact of ASU No. 2018-14 on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software,” an update to Subtopic ASC 350-40. The guidance directs accounting for service contracts for cloud computing arrangements to follow guidance within ASC 350-40 to determine capitalization of implementation costs. The guidance is effective for fiscal years beginning after December 15, 2019, and is permitted for early adoption. The standard may be applied on either a retrospective or prospective basis. We are currently analyzing the impact of ASU No. 2018-15 on our condensed consolidated financial statements.

In August 2018, the SEC issued a final rule Release No. 33-10532, “Disclosure Update and Simplification,” to amend certain disclosure requirements now seen as redundant, duplicative, overlapping, outdated or superseded in the wake of recent accounting pronouncements. The amended rules became effective November 5, 2018. We analyzed the release in preparation of our Form 10-Q during the first interim period in 2019, which resulted in the additional disclosure of changes to stockholders’ equity during interim periods, as presented within the condensed consolidated statements of stockholders’ equity. We note that many of the amended requirements under this Release are not applicable to the Company, as we do not make dividend payments to stockholders, currently report our activities under a single business segment, and already provided all other significant disclosure requirements.

In November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606.” The guidance clarifies the interactions between Topic 808 and Topic 606, including clarifications on revenue recognition, unit of account, and reporting disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2019, and is permitted for early adoption. The standard is to be applied on a retrospective basis to the date of the initial application of Topic 606. We utilize collaborative arrangements as described in our license agreements footnote and are currently analyzing the impact of ASU No. 2018-18 on our condensed consolidated financial statements.

Revenues

6 Months Ended

Jun. 30, 2019

Revenues

3. Revenues

The following table presents our disaggregated revenue for the periods presented (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
JAKAFI revenues, net	$	409,506	$	345,624	$	785,117	$	659,344
ICLUSIG revenues, net		24,391		19,900		45,029		40,685
Total product revenues, net		433,897		365,524		830,146		700,029
JAKAVI product royalty revenues		56,895		47,101		102,466		88,438
OLUMIANT product royalty revenues		19,140		8,852		35,177		15,231
Total product royalty revenues		76,035		55,953		137,643		103,669
Milestone and contract revenues		20,000		100,000		60,000		100,000
Other revenues		—		39		—		100
Total revenues	$	529,932	$	521,516	$	1,027,789	$	903,798

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

Fair value of financial instruments

6 Months Ended

Jun. 30, 2019

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 guidance 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, 2019 and December 31, 2018, 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 into hierarchy levels during the six months ended June 30, 2019.

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, 2019
Cash and cash equivalents	$	1,416,224	$	—	$	—	$	1,416,224
Debt securities (corporate and government)		—		279,631		—		279,631
Long term investments (Note 9)		115,563		—		—		115,563
Total assets	$	1,531,787	$	279,631	$	—	$	1,811,418


	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, 2018
Cash and cash equivalents	$	1,163,980	$	—	$	—	$	1,163,980
Debt securities (corporate and government)		—		274,343		—		274,343
Long term investment (Note 9)		99,199		—		—		99,199
Total assets	$	1,263,179	$	274,343	$	—	$	1,537,522

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


	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2019
Acquisition-related contingent consideration	$	—	$	—	$	286,000	$	286,000
Total liabilities	$	—	$	—	$	286,000	$	286,000


	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2018
Acquisition-related contingent consideration	$	—	$	—	$	287,001	$	287,001
Total liabilities	$	—	$	—	$	287,001	$	287,001

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


Balance at January 1, 2019	$	287,001
Contingent consideration earned during the period but not yet paid		(7,608)
Payments made during the period		(6,672)
Change in fair value of contingent consideration		13,279
Balance at June 30, 2019	$	286,000

The fair value of the contingent consideration was determined using an income approach based on projected ICLUSIG revenues in the European Union and other countries for the approved third-line treatment and discount rates. 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, 2019 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. At June 30, 2019 and December 31, 2018, contingent consideration earned but not yet paid was $7.6 million and $13.2 million, respectively. Royalties earned in the second quarter of 2019 of $7.6 million were included in accrued and other current liabilities at June 30, 2019. Royalties earned in the third quarter of 2018 of $6.7 million were included in accounts payable and the royalties earned in the fourth quarter of 2018 of $6.5 million were included in accrued and other current liabilities at December 31, 2018. We paid Takeda $6.7 million for royalties earned in the first quarter of 2019 that were included in accrued and other current liabilities at March 31, 2019.

The following is a summary of our marketable security portfolio (in thousands):


			Net		Net
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
June 30, 2019
Debt securities (corporate and government)	$	279,553	$	78	$	—	$	279,631

December 31, 2018
Debt securities (corporate and government)	$	275,405	$	—	$	(1,062)	$	274,343

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, 2019

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. In December 2018, we entered into a research collaboration and licensing agreement with Innovent Biologics, Inc. (“Innovent”). The concentration of credit risk related to our collaborative partners is as follows:


	Percentage of Total				Percentage of Total
	Milestone and Contract Revenues for the				Milestone and Contract Revenues for the
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Collaboration Partner A	—	%	—	%	—	%	—	%
Collaboration Partner B	—	%	100	%	—	%	100	%
Collaboration Partner C	100	%	—	%	100	%	—	%

Collaboration Partners A, B and C comprised, in aggregate, 27% and 42% of the accounts receivable balance as of June 30, 2019 and December 31, 2018, 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,
	2019		2018		2019		2018
Customer A	20	%	21	%	19	%	21	%
Customer B	13	%	15	%	14	%	14	%
Customer C	16	%	14	%	16	%	14	%
Customer D	11	%	12	%	12	%	11	%

We are exposed to risks associated with extending credit to customers related to the sale of products. Customers A, B, C and D comprised, in aggregate, 36% and 30% of the accounts receivable balance as of June 30, 2019 and December 31, 2018, respectively.

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

Inventory

6 Months Ended

Jun. 30, 2019

Inventory

6. Inventory

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


	June 30,		December 31,
	2019		2018
Raw materials	$	1,766	$	481
Work-in-process		6,929		3,488
Finished goods		3,998		6,436
		12,693		10,405
Inventories-current		6,527		6,967
Inventories-noncurrent	$	6,166	$	3,438

Inventories, stated at the lower of cost and net realizable value, consist of raw materials, work in process and finished goods. At June 30, 2019, $6.5 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, 2019, $6.2 million of inventory was classified as noncurrent on the condensed consolidated balance sheets as we did not expect

this inventory to be consumed for commercial use within the next twelve months. We obtain some inventory components from a limited number of suppliers due to technology, availability, price, quality or other considerations. The loss of a supplier, the deterioration of our relationship with a supplier, or any unilateral violation of the contractual terms under which we are supplied components by a supplier could adversely affect our total revenues and gross margins.

Property and equipment, net

6 Months Ended

Jun. 30, 2019

Property and equipment, net

7. Property and equipment, net

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


	June 30,		December 31,
	2019		2018
Office equipment	$	15,240	$	16,955
Laboratory equipment		65,439		61,697
Computer equipment		56,687		55,436
Land		10,161		10,122
Building and leasehold improvements		211,346		213,196
Operating lease right-of-use assets		27,622		—
Construction in progress		69,038		65,576
		455,533		422,982
Less accumulated depreciation and amortization		(116,411)		(103,231)
Property and equipment, net	$	339,122	$	319,751

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 serve as our new European headquarters and will consist of approximately 100,000 square feet of office space. This building will allow for consolidation of our European operations that are currently located in Geneva and Lausanne, Switzerland. Building permits were granted by the local government authorities in September 2018, and construction activity began immediately thereafter. In June 2019, we obtained control of the Morges building to begin our construction activity. At that time, we determined the lease to be a finance lease and recorded a lease liability of $31.1 million and a lease right-of-use asset of $29.1 million, net of a lease incentive from our landlord of $2.0 million. As of June 30, 2019, we have capitalized approximately $3.9 million in on site preparation, design and construction costs.

In July 2018, we signed an agreement to purchase land located within Y-PARC, Switzerland’s largest technology park in Yverdon. The land was purchased, in cash, for $4.8 million. Upon this parcel, we plan on constructing a large molecule production facility. Construction activity commenced in July 2018, and as of June 30, 2019, we have recorded approximately $55.2 million in costs for construction, ground preparation and architectural and engineering studies. We currently anticipate the facility to be completed in the second half of 2020.

As stated in Note 2, in January 2019, we adopted ASC 842, Leases, which changed the accounting and reporting of our lease activity. Although we do not have significant lease activity, we are the lessee of several contracts, including those to secure fleet vehicles, buildings and equipment. Our lease agreements do not contain any material residual value guarantees or restrictive covenants. Some of our building leases include options to renew and the exercise of these options is at our discretion. Our current operating lease liabilities are reflected in accrued and other current liabilities and our noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheets.

As of June 30, 2019 our lease liabilities are as follows (in thousands):


Current
Operating lease liabilities	$	10,832
Finance lease liabilities		791
Noncurrent
Operating lease liabilities		13,284
Finance lease liabilities		31,643
Total lease liabilities	$	56,550

The cash paid for amounts included in the measurement of our operating lease liabilities for the six months ended June 30, 2019 was $5.4 million in operating cash flows. The cash paid for amounts included in the measurement of our finance lease liabilities for the six months ended June 30, 2019 was $0.4 million in financing cash flows.

The maturity of our lease liabilities are as follows (in thousands):


	Operating		Finance
Remainder of 2019	$	6,771	$	449
2020		7,901		697
2021		5,121		2,454
2022		2,831		2,706
2023		1,588		2,713
After 2023		1,346		35,262
Total lease cash payments	$	25,558	$	44,281
Less: discount		1,442		11,847
Present value of lease liabilities	$	24,116	$	32,434

As of June 30, 2019, our finance and operating leases had a weighted average lease term of approximately 16.0 and 4.5 years, respectively. The discount rate of our leases is an approximation of an estimated incremental borrowing rate and is dependent upon the term and economics of each agreement. The weighted average discount rate of our finance and operating leases is approximately 3.7% and 4.7%, respectively. For the three and six months ended June 30, 2019, we incurred approximately $3.6 million and $7.3 million, respectively, of expense related to our operating leases, approximately $0.2 million and $0.4 million, respectively, of amortization on our finance lease right-of-use assets and a de minimis amount of interest expense on our finance lease liabilities. Rent expense for the three and six months ended June 30, 2018 was $3.7 million and $7.0 million, respectively. For the three and six months ended June 30, 2019, the cost of our short term leases with a term less than 12 months was de minimis.

Intangible assets and goodwill

6 Months Ended

Jun. 30, 2019

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, 2019

Balance at December 31, 2018

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

66,404

204,596

271,000

55,636

215,364

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


		Remainder of
		2019		2020		2021		2022		2023		Thereafter
Amortization expense	$	10,771	$	21,536	$	21,536	$	21,536	$	21,536	$	107,681

Goodwill

There were no changes to the carrying amount of goodwill for the six months ended June 30, 2019.

License agreements

6 Months Ended

Jun. 30, 2019

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 the aggregate, $132.0 million for the achievement of development milestones, $215.0 million for the achievement of regulatory milestones and $120.0 million for the achievement of sales milestones through June 30, 2019.

In 2018, under this agreement, we recognized a $60.0 million sales milestone for Novartis achieving annual net sales of a JAK licensed product of $900.0 million. In 2017, 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, 2019, such royalties payable to Novartis on net sales within the United States totaled $20.1 million and $33.5 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, 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. At June 30, 2019 and December 31, 2018, $26.8 million and $18.6 million, respectively, of accrued royalties payable to Novartis were included in accrued and other current liabilities on the condensed consolidated balance sheets. Each company is responsible for costs relating to the development and commercialization of ruxolitinib in its respective territories, with costs of collaborative studies shared equally. Novartis is also responsible for all costs relating to the development and commercialization of capmatinib.

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

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, 2019 and December 31, 2018, $0.3 million and $0.7 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, 2019 were net of $0.4 million and $1.0 million, respectively, of costs reimbursed by Novartis. 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.

Milestone and contract revenue under the Novartis agreement for the three and six months ended June 30, 2019 and 2018 was $0.0 million. Product royalty revenue related to Novartis net sales of JAKAVI outside of the United States for the three and six months ended June 30, 2019 was $56.9 million and $102.5 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. At June 30, 2019 and December 31, 2018, $56.9 million and $55.4 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, $149.0 million for the achievement of development milestones and $235.0 million for the achievement of regulatory milestones through June 30, 2019.

In January 2016, Lilly submitted an NDA to the FDA and a Marketing Authorization Application (MAA) to the European Medicines Agency for baricitinib as treatment for rheumatoid arthritis. In February 2017, we and Lilly announced that the European Commission approved baricitinib as OLUMIANT for the treatment of moderate-to-severe rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to, one or more disease-modifying antirheumatic drugs. In July 2017, Japan's Ministry of Health, Labor and Welfare granted marketing approval for OLUMIANTfor the treatment of rheumatoid arthritis in patients with inadequate response to standard-of-care therapies. In June 2018, the FDA approved the 2mg dose of OLUMIANT for the treatment of adults with moderately-to-severely active rheumatoid arthritis who have had an inadequate response to one or more tumor necrosis factor inhibitor therapies.

In 2018, under this agreement, we recognized a $20.0 million development milestone for the first patient treated in the systemic lupus erythematosus Phase III program for baricitinib and 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.

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

our base royalties plus an incremental pro-rated royalty commensurate with our contribution to the total co-development cost for those indications for which we co-funded. We previously had retained an option to co-promote products in the United States but, in March 2016, we waived our co-promotion option as part of an amendment to the agreement.

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

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, 2019 were $0.0 million. 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, 2018 were $14.2 million and $26.7 million, respectively. At June 30, 2019 and December 31, 2018, a total of $0.0 million and $23.1 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

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 and contract revenue under the Lilly agreement for the three and six months ended June 30, 2019 was $0.0 million. Milestone revenue under the Lilly agreement for the three and six months ended June 30, 2018 was $100.0 million. Product royalty revenue related to Lilly global net sales of OLUMIANT for the three and six months ended June 30, 2019 was $19.1 million and $35.2 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. At June 30, 2019 and December 31, 2018, $19.5 million and $14.0 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. In May 2019, the approval of JAKAFI in steroid-refractory acute GVHD triggered a $20.0 million milestone payment to Lilly.

Agenus

In January 2015, we entered into a License, Development and Commercialization Agreement with Agenus Inc. and its wholly-owned subsidiary, 4-Antibody AG, (now known as Agenus Switzerland Inc.), which we collectively refer to as Agenus. Under this agreement, the parties have agreed to collaborate on the discovery of novel immuno-therapeutics using Agenus’ antibody discovery platforms. The agreement became effective on February 18, 2015, upon the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Upon closing of the agreement, we paid Agenus total consideration of $60.0 million.

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

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 was recorded in research and development expense. 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 and in September 2018 we recorded a $5.0 million development milestone due to Agenus for the TIM-3 program.

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

We 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 16% of the outstanding shares of Agenus Inc. common stock as of June 30, 2019. 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, 2019, we recorded an unrealized gain of $0.5 million and $11.0 million, respectively, based on the change in fair value of Agenus Inc.’s common stock during these periods. 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 change in fair value of Agenus Inc.’s common stock during these periods. The fair market value of our long term investment in Agenus Inc. at June 30, 2019 and December 31, 2018 was $53.3 million and $42.3 million, respectively.

For the three months ended March 31, 2019, Agenus reported within its Form 10-Q total revenues of approximately $79.9 million and net income of approximately $17.4 million within their condensed consolidated financial statements.

Research and development expenses for the three and six months ended June 30, 2019 also included $0.5 million and $0.9 million, respectively, of development costs incurred pursuant to the Agenus arrangement. 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. At June 30, 2019 and December 31, 2018, a total of $1.8 million and $2.3 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Merus

In December 2016, we entered into a Collaboration and License Agreement with Merus N.V. (“Merus”). Under this agreement, which became effective in January 2017, the parties have agreed to collaborate with respect to the research, discovery and development of bispecific antibodies utilizing Merus’ technology platform. The collaboration encompasses up to eleven independent programs.

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

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

In February 2017, we paid Merus an upfront non-refundable payment of $120.0 million. For each program as to which Merus does not have commercialization or development co-funding rights, Merus will be eligible to receive up to $100.0 million in future contingent development and regulatory milestones, and up to $250.0 million in commercialization milestones as well as tiered royalties ranging from 6% to 10% of global net sales. For each program as to which Merus exercises its option to co-fund development, Merus will be eligible to receive a 50% share of profits (or sustain 50% of any losses) in the United States and be eligible to receive tiered royalties ranging from 6% to 10% of net sales of products outside of the United States. If Merus opts to cease co-funding a program as to which it exercised its co-development option, then Merus will no longer receive a share of profits in the United States but will be eligible to receive the same milestones from the co-funding termination date and the same tiered royalties described above with respect to programs where Merus does not have a right to co-fund development and, depending on the stage at which Merus chose to cease co-funding development costs, Merus will be eligible to receive additional royalties ranging up to 4% of net sales in the United

States. For MCLA-145, we and Merus will each be eligible to receive tiered royalties on net sales in the other party’s territory at rates ranging from 6% to 10%.

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

In addition, in December 2016, we entered into a Share Subscription Agreement with Merus, pursuant to which we agreed to purchase 3.2 million common shares of Merus for an aggregate purchase price of $80.0 million in cash, or $25.00 per share. We 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 and $7.2 million was allocated to research and development expense. The fair market value of our total long term investment in Merus at June 30, 2019 and December 31, 2018 was $46.9 million and $44.8 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, 2019, 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, 2019 we recorded an unrealized loss of $0.4 million and an unrealized gain of $2.1 million, respectively, based on the change in fair value of Merus’ common stock during these periods. 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 change in fair value of Merus’ common stock during these periods.

For the three months ended March 31, 2019, Merus reported within its Form 6-K total revenues of approximately €7.7 million and net loss of approximately €6.2 million within their condensed consolidated financial statements.

Research and development expenses for the three and six months ended June 30, 2019 included $1.7 million and $4.3 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, 2018 included $2.8 million and $5.2 million, respectively, of additional development costs incurred pursuant to the Merus agreement. At June 30, 2019 and December 31, 2018, a total of $1.6 million and $2.9 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Calithera

In January 2017, we entered into a Collaboration and License Agreement with Calithera Biosciences, Inc. (“Calithera”). Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase inhibitors, including 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.

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 and $41.4 million was allocated to research and development expense. The fair market value of our long term investment in Calithera at June 30, 2019 and December 31, 2018 was $6.7 million and $6.9 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, 2019, we owned approximately 4% of the outstanding shares of Calithera common stock and there are several other stockholders who hold larger positions of Calithera. As we do not hold a significant position of the voting shares of Calithera and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment. We intend to hold the investment in Calithera for the foreseeable future, and 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, 2019 we recorded an unrealized loss of $4.9 million and $0.2 million, respectively, based on the change in fair value of Calithera’s common stock during these periods. 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 change in fair value of Calithera’s common stock during these periods.

Research and development expenses for the three and six months ended June 30, 2019 also included $5.4 million and $10.0 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, 2018 also included $3.2 million and $5.8 million, respectively, of additional development costs incurred pursuant to the Calithera agreement. At June 30, 2019 and December 31, 2018, a total of $2.4 million and $2.6 million, respectively, of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

MacroGenics

In October 2017, we entered into a Global Collaboration and License Agreement with MacroGenics, Inc. (“MacroGenics”). Under this agreement, we received exclusive development and commercialization rights worldwide to MacroGenics’ INCMGA0012 (formerly MGA012), an investigational monoclonal antibody that inhibits PD-1. Except as set forth in the succeeding sentence, we will have sole authority over and bear all costs and expenses in connection with the development and commercialization of INCMGA0012 in all indications, whether as a monotherapy or as part of a combination regimen. MacroGenics has retained the right to develop and commercialize, at its cost and expense, its pipeline assets in combination with INCMGA0012. In addition, MacroGenics has the right to manufacture a portion of both companies’ global clinical and commercial supply needs of INCMGA0012. In December 2017, we paid MacroGenics an upfront payment of $150.0 million which was recorded in research and development expense on the 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. In September 2018, we recorded $10.0 million and in November 2018 we recorded $5.0 million in aggregate milestones due to MacroGenics for the achievement of certain clinical milestones as part of our collaboration and license agreement, which were recorded in research and development expense.

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, 2019 also included $9.8 million and $19.2 million, respectively, of additional development costs incurred pursuant to the MacroGenics 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, 2019 and December 31, 2018, a total of $2.6 million and $3.2 million of such costs were included in accrued and other liabilities on the condensed consolidated balance sheets.

Syros

In January 2018, we entered into a target discovery, research collaboration and option agreement with Syros Pharmaceuticals, Inc. (“Syros”). Under this agreement, Syros will use its proprietary gene control platform to identify novel therapeutic targets with a focus in myeloproliferative neoplasms and we have received options to obtain exclusive worldwide rights to intellectual property resulting from the collaboration for up to seven validated targets. We will have exclusive worldwide rights to develop and commercialize any therapies under the collaboration that modulate those

validated targets. We have agreed to pay Syros up to $54.0 million in target selection and option exercise fees should we decide to exercise all of our options under the agreement. For products resulting from the collaboration against each of the seven selected and validated targets, we have agreed to pay up to $50.0 million in potential development and regulatory milestones and up to $65.0 million in potential 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.

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 and $2.4 million, representing premium paid on the purchase, was allocated to research and development expense. Also in January 2018, we entered into an Amended Stock Purchase Agreement with Syros for the purchase of an additional 0.1 million common shares of Syros for an aggregate purchase price of $1.4 million in cash, or $9.55 per share. The shares were acquired in February 2018 and the $1.4 million aggregate purchase price was recorded within long term investments on the condensed consolidated balance sheets. All acquired shares were subsequently registered under the Securities Act of 1933 in February 2018. The fair market value of our long term investment in Syros as of June 30, 2019 and December 31, 2018 was $8.7 million and $5.2 million, respectively.

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, 2019, we owned approximately 2% of the outstanding shares of Syros common stock and there are several other stockholders who hold larger positions of Syros. As we do not hold a significant position of the voting shares of Syros and lack the qualitative characteristics associated with the ability to exercise significant influence, our ownership interest does not meet the criteria to be accounted for as an equity method investment. We intend to hold the investment in Syros for the foreseeable future and therefore, are accounting for our shares held in Syros at fair value 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, 2019, we recorded an unrealized gain of $0.2 million and $3.5 million, respectively, based on the change in fair value of Syros’ common stock during these periods. 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 change in fair value of Syros’ common stock during these periods.

Innovent

In December 2018, we entered into a research collaboration and licensing agreement with Innovent. Under the terms of this agreement, Innovent received exclusive development and commercialization rights to our clinical-stage product candidates pemigatinib, itacitinib and parsaclisib in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. In January 2019, we recognized an upfront payment under this agreement of $40.0 million upon our transfer of the intellectual property related to the clinical-stage product candidates to Innovent, which was recorded in milestone and contract revenues on the condensed consolidated statement of operations for the three months ended March 31, 2019. In addition, we are eligible to receive $20.0 million in connection with the first related IND filing in China, up to $129.0 million in potential development and regulatory milestones, and up to $202.5 million in potential commercial milestones. We are also eligible to receive tiered royalties from the high-teens to the low-twenties on future sales of products resulting from the collaboration. We retain an option to assist in the promotion of the three product candidates in the Innovent territories. In June 2019, we recognized the $20.0 million milestone for the first related IND filing in China.

Stock compensation

6 Months Ended

Jun. 30, 2019

Stock compensation

10. Stock compensation

We recorded $40.6 million and $81.2 million of stock compensation expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2019, respectively. 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. For the three and six months ended June 30, 2019, we capitalized $0.1 million and $0.2 million, respectively, of stock compensation expense as part of the cost of an asset. Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $27.6 million, $55.0 million, $24.8 million and $49.0 million for the three and six months ended June 30, 2019 and 2018, respectively. Stock compensation expense included within our condensed consolidated statements of operations also included selling, general and administrative expense of $12.8 million, $25.8 million, $11.8 million and $23.8 million for the three and six months ended June 30, 2019 and 2018, respectively. Stock compensation expense included within our condensed consolidated statements of operations also included cost of product revenues of $0.2 million and $0.4 million, respectively, for the three and six months ended June 30, 2019.

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,
	2019		2018		2019		2018		2019		2018		2019		2018
Average risk-free interest rates	2.26	%	2.71	%	2.49	%	2.47	%	1.75	%	2.52	%	2.10	%	2.50	%
Average expected life (in years)	5.55		5.37		5.34		5.50		0.50		0.50		0.50		0.50
Volatility	39	%	46	%	45	%	45	%	37	%	30	%	34	%	51	%
Weighted-average fair value (in dollars)	30.92		28.65		31.47		39.47		13.11		12.11		13.69		16.25

The risk-free interest rate is derived from the U.S. Federal Reserve rate in effect at the time of grant. The expected life calculation is based on the observed and expected time to the exercise of options by our employees based on historical exercise patterns for similar type options. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options. A dividend yield of zero is assumed based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends. Nonemployee awards are measured on the grant date by estimating the fair value of the equity instruments to be issued using the expected term, similar to our employee awards.

Option activity under the 2010 Stock Plan was as follows:


	Shares Subject to
	Outstanding Options
		Weighted Average
	Shares	Exercise Price
Balance at December 31, 2018	12,285,159	$	74.39
Options granted	2,429,688	$	73.23
Options exercised	(1,178,225)	$	26.93
Options cancelled	(567,093)	$	91.76
Balance at June 30, 2019	12,969,529	$	77.72

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
	Outstanding Awards
	Shares	Grant Date Value
Balance at December 31, 2018	2,043,337	$	80.35
RSUs granted	193,950	$	74.74
PSUs granted	100,000	$	74.38
PSUs achieved	44,940	$	65.76
RSUs cancelled	(83,723)	$	85.58
PSUs cancelled	(22,764)	$	66.44
RSUs released	(316,325)	$	87.99
Balance at June 30, 2019	1,959,415	$	77.86

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, 2019, a cumulative total of 333,334 RSUs granted to Mr. Hoppenot had vested and were released, leaving 66,666 RSUs outstanding.

In June 2018, we granted 190,000 RSUs and 446,500 PSUs under long term incentive plans with performance and/or service-based milestones with graded and/or cliff vesting over three to four years. In April 2019, we granted an additional 100,000 PSUs under the existing long term incentive plan with performance based milestones and cliff vesting. 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 was subject to a multiplier of up to 267% based on the level at which the performance conditions were achieved. The actual number of shares of our common stock into which each PSU converted was at a multiplier of 142% based on the performance conditions being achieved as of March 31, 2019. 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 three and six months ended June 30, 2019, the stock compensation expense recorded during the period was for service-based awards and performance conditions deemed probable of achievement and/or achieved. For PSUs containing performance conditions which were not deemed probable of achievement at June 30, 2019, no stock compensation expense was recognized.

In July 2018, we granted 77,243 PSUs to executives with performance milestones and graded vesting over four years. The shares of our common stock into which each PSU may convert is subject to a multiplier up to 150% based on the level at which the performance condition is achieved. Compensation expense for the performance-based awards is recorded over the estimated service period when the performance condition is deemed probable of achievement. The actual number of shares of our common stock into which each PSU converted was at a multiplier of 83% based on the performance condition being achieved as of December 31, 2018.

The following table summarizes our shares available for grant:


		Shares Available
		for Grant
Balance at December 31, 2018		7,023,328
Additional authorization		7,700,000
Options, RSUs and PSUs granted		(2,891,106)
Options, RSUs and PSUs cancelled		673,580
Balance at June 30, 2019		12,505,802

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, 2019, was $110.3 million, which is expected to be recognized over the weighted average period of approximately 1.5 years. Total compensation cost of RSUs granted but not yet vested, as of June 30, 2019, was $49.3 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, 2019, was $32.7 million, which is expected to be recognized over the weighted average period of 2.6 years, should the underlying performance conditions be deemed probable of achievement.

Accrued and other current liabilities

6 Months Ended

Jun. 30, 2019

Accrued and other current liabilities

11. Accrued and other current liabilities

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


	June 30,		December 31,
	2019		2018
Royalties	$	34,376	$	25,087
Clinical related costs		64,963		98,607
Sales allowances		60,890		44,770
Construction in progress		2,847		7,673
Financing lease liability		—		18,696
Other current liabilities		47,398		34,568
Total accrued and other current liabilities	$	210,474	$	229,401

Debt

6 Months Ended

Jun. 30, 2019

Debt

12. Debt

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


				Carrying Amount,
	Interest Rates			June 30,		December 31,
Debt	June 30, 2019		Maturities	2019		2018
1.25% Convertible Senior Notes due 2020	1.25	%	2020	$	17,862	$	17,434
					17,862		17,434
Less current portion					—		—
				$	17,862	$	17,434

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


	June 30, 2019				December 31, 2018
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
1.25% Convertible Senior Notes due 2020	$	17,862	$	31,695	$	17,434	$	25,073
	$	17,862	$	31,695	$	17,434	$	25,073

The fair value of the 1.25% Convertible Senior Notes due November 15, 2020 (the “2020 Notes”) is based on data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments, and, therefore, is classified within Level 2 in the fair value hierarchy.

Prior to May 14, 2014, the 2020 Notes were not convertible except in connection with a make-whole fundamental change, as defined in the indenture. Beginning on, and including, May 15, 2014, the 2020 Notes are convertible prior to the close of business on the business day immediately preceding May 15, 2020 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 2020 Notes 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 the 2020 Notes 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 2020 Notes on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after May 15, 2020 until the close of business on the second scheduled trading day immediately preceding the relevant maturity date, the 2020 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, 2019, the 2020 Notes became convertible through at least September 30, 2019, based on meeting the conversion criteria related to the sale price of our common stock during the calendar quarter ended June 30, 2019 as described in (i) above. The 2020 Notes are reflected in long term liabilities on the condensed consolidated balance sheet as of June 30, 2019 as management’s intent is to settle any conversions of the 2020 Notes during this period in shares of our common stock.

Employee benefit plans

6 Months Ended

Jun. 30, 2019

Employee benefit plans

13. Employee benefit plans

Defined Contribution Plans

We have a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code covering all U.S. employees and defined contribution plans for other Incyte employees in Europe. 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, 2019 was $3.1 million and $6.0 million, respectively. Defined contribution expense for the three and six months ended June 30, 2018 was $2.8 million and $5.5 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 assets of the pension plans are held in collective investment accounts represented by the cash surrender value of an insurance policy and are classified as Level 2 within the fair value hierarchy.

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Service cost	$	1,288	$	1,032	$	2,550	$	2,111
Interest cost		86		68		169		139
Expected return on plan assets		(61)		(47)		(120)		(97)
Amortization of prior service cost		62		45		107		90
Amortization of actuarial losses		46		66		112		132
Net periodic benefit cost	$	1,421	$	1,164	$	2,818	$	2,375

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 $3.5 million to the pension plans in 2019 inclusive of the amounts contributed to the plan during the current period. As of June 30, 2019 and December 31, 2018, $16.2 million and $15.7 million, respectively, of accrued pension obligation is recorded in other long term liabilities on the condensed consolidated balance sheets.

Income taxes

6 Months Ended

Jun. 30, 2019

Income taxes

14. Income taxes

For the three and six months ended June 30, 2019, we recorded income tax expense of approximately $3.4 million and $5.1 million, respectively. 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. The change in tax expense for the three and six months ended June 30, 2019 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, 2019, 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 $0.9 million during the six months ended June 30, 2019, of which only $0.2 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 and research and development tax credits.

Net income per share

6 Months Ended

Jun. 30, 2019

Net income per share

15. Net income per share

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)		2019	2018			2019	2018
Basic Net Income Per Share
Basic net income	$	105,318	$	52,394	$	207,630	$	11,254
Weighted average common shares outstanding		214,620		212,210		214,342		211,945

Basic net income per share	$	0.49	$	0.25	$	0.97	$	0.05

Diluted Net Income Per Share
Diluted net income	$	105,318	$	52,394	$	207,630	$	11,254
Weighted average common shares outstanding		214,620		212,210		214,342		211,945

Dilutive stock options and awards		2,863		2,893		2,932		3,349

Weighted average shares used to compute diluted net income per share		217,483		215,103		217,274		215,294

Diluted net income per share	$	0.48	$	0.24	$	0.96	$	0.05

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,
	2019	2018	2019	2018
Outstanding stock options and awards	9,165,776	8,079,446	9,221,941	6,732,551
Common shares issuable upon conversion of the 2018 Notes	—	148,817	—	148,817
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 income (loss) per share computation	9,534,715	8,597,202	9,590,880	7,250,307

Contingencies

6 Months Ended

Jun. 30, 2019

Contingencies

16. Contingencies

In December 2018, we received a civil investigative demand from the U.S. Department of Justice for documents and information relating to our speaker programs and patient assistance programs, including our support of non-profit organizations that provide financial assistance to eligible patients. We are cooperating with this inquiry. Given that the investigation is still ongoing and that we have not yet been made aware of the substance of any civil claims, we cannot predict the outcome of the investigation, the timing of the ultimate resolution of this matter, or reasonably estimate the possible range of loss, if any, that may result from this matter. Accordingly, no reserve has been made with respect to this matter as of June 30, 2019.

Subsequent events

6 Months Ended

Jun. 30, 2019

Subsequent events

17. Subsequent event

In July 2019, we entered into a collaboration and license agreement with Zai Lab (Shanghai) Co., Ltd., a subsidiary of Zai Lab Limited (collectively, “Zai Lab”). Under the terms of this agreement, Zai Lab received development and exclusive commercialization rights to INCMGA0012 in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. We expect to recognize an upfront payment under this agreement of $17.5 million during the third quarter of 2019, and are eligible to receive an additional $60.0 million in potential development, regulatory and commercial milestones, as well as tiered royalties from the low to mid-twenties. We also retain an option to assist in the promotion of INCMGA0012 in Zai Lab’s licensed territories.

Summary of significant accounting policies (Policies)	6 Months Ended
Summary of significant accounting policies (Policies)	Jun. 30, 2019
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, 2019, the condensed consolidated statements of operations, comprehensive income, and stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 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, 2018 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, 2018.
Principles of Consolidation	Principles of Consolidation. The condensed consolidated financial statements include the accounts of Incyte Corporation and our wholly owned subsidiaries. All inter-company accounts, transactions, and profits have been eliminated in consolidation.
Foreign Currency Translation	Foreign Currency Translation. Operations in non-U.S. entities are recorded in the functional currency of each entity. For financial reporting purposes, the functional currency of an entity is determined by a review of the source of an entity's most predominant cash flows. The results of operations for any non-U.S. dollar functional currency entities are translated from functional currencies into U.S. dollars using the average currency rate during each month. Assets and liabilities are translated using currency rates at the end of the period. Adjustments resulting from translating the financial statements of our foreign entities that use their local currency as the functional currency into U.S. dollars are reflected as a component of other comprehensive income (loss). Transaction gains and losses are recorded in other income (expense), net, in the condensed consolidated statements of operations.
Use of Estimates	Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Concentrations of Credit Risk	Concentrations of Credit Risk. Cash, cash equivalents, marketable securities, and trade receivables are financial instruments which potentially subject us to concentrations of credit risk. The estimated fair value of financial instruments approximates the carrying value based on available market information. 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, 2019 and December 31, 2018, we had a de minimis 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, 2019, there were no entities in which we held a variable interest which we determined to be VIEs.
Long Term Equity Investments	Long Term Investments. Our long term investments consist of equity investments in common stock of publicly-held companies with whom we have entered into collaboration and license agreements. We classify all of our equity investments in common stock of publicly-held companies as long term investments on the condensed consolidated balance sheets. Our equity investments are accounted for at fair value using readily determinable pricing available on a securities exchange on the condensed consolidated balance sheets. All changes in fair value are reported in the condensed consolidated statements of operations as an unrealized gain (loss) on long term investments. In assessing whether we exercise significant influence over any of the companies in which we hold equity investments, we consider the nature and magnitude of our investment, any voting and protective rights we hold, any participation in the governance of the other company, and other relevant factors such as the presence of a collaboration or other business relationship. Currently, none of our equity investments in publicly-held companies are considered relationships in which we are able to assert control.
Property and Equipment	Property and Equipment, net. Property and equipment, net is stated at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or lease term.
Lease Accounting	Lease Accounting. The new accounting standard for leases, Accounting Standard Codification (“ASC”) 842, Leases, was adopted for the fiscal year beginning on January 1, 2019. Per the new standard, all leases with a lease term greater than 12 months, regardless of lease type classification, are recorded as an obligation on the balance sheet with a corresponding right-of-use asset. Under the prior leasing standard, only contracts assessed as capital leases were recorded on the balance sheet. Both finance and operating leases are reflected as liabilities on the commencement date of the lease based on the present value of the lease payments to be made over the lease term. Current operating lease liabilities are reflected in accrued and other current liabilities and noncurrent operating lease liabilities are reflected in other liabilities on the condensed consolidated balance sheet. Right-of-use assets are valued at the initial measurement of the lease liability, plus any initial direct costs or rent prepayments, minus lease incentives and deferred lease payments, and are amortized over the lease term. Operating right-of-use assets are recorded in property and equipment, net on the condensed consolidated balance sheet. For operating leases, the expense recognition is similar to that of operating leases under ASC 840, with a single lease cost recognized on a straight-line basis. For finance leases, the expense recognition is similar to that of capital leases under ASC 840, with separate amortization and interest expense, with higher interest expense in the earlier periods of a lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the term of the lease. In determining whether a contract contains a lease, asset and service agreements are assessed at onset and upon modification for criteria of specifically identified assets, control and economic benefit.
Other Intangible Assets, net	Other Intangible Assets, net. Other intangible assets, net consist of licensed intellectual property rights acquired in business combinations, which are reported at acquisition date fair value, less accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives using the straight-line method.
Impairment of Long-Lived Assets	Impairment of Long-Lived Assets. Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset. If the expected cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted future cash flows.
Goodwill	Goodwill. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually as of October 1 or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts. A reporting unit is the same as, or one level below, an operating segment. Our operations are currently comprised of a single, entity wide reporting unit. We completed our most recent annual impairment assessment as of October 1, 2018 and determined that the carrying value of our goodwill was not impaired.
Income Taxes	Income Taxes. We account for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts reportable for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. We recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the position will be sustained upon examination by the taxing authorities, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any interest and penalties on uncertain tax positions are included within the tax provision.
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, performance 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.
Revenue Recognition	Revenue Recognition. 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. Revenue is recognized when we have satisfied a performance obligation through transferring control of the promised good or service to a customer. Control, in this instance, may mean the ability to prevent other entities from directing the use of, and receiving benefit from, a good or service. We determine at contract inception whether we 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. Product Revenues Our product revenues consist of U.S. sales of JAKAFI and European sales of ICLUSIG. Product revenues are recognized once we satisfy the performance obligation at a point in time under the revenue recognition criteria as 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. At June 30, 2019 and December 31, 2018, $60.9 million and $44.8 million, respectively, of accrued sales allowances were included in accrued and other current liabilities on the condensed consolidated balance sheets. Product shipping and handling costs are included in cost of product revenues. Customer Credits: Our customers are offered various forms of consideration, including allowances, service fees and prompt payment discounts. We expect our customers will earn prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized. Service fees are also deducted from total product sales as they are earned. Rebates and Discounts: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program in the U.S. and mandated discounts in Europe in markets where government-sponsored healthcare systems are the primary payers for healthcare. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers. The accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launches. Our estimates for expected utilization of rebates are based on data received from our customers. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. Chargebacks: Chargebacks are discounts that occur when certain contracted customers, which currently consist primarily of group purchasing organizations, Public Health Service institutions, non-profit clinics, and Federal government entities purchasing via the Federal Supply Schedule, purchase directly from our wholesalers. Contracted customers generally purchase the product at a discounted price. The wholesalers, in turn, charges back to us the difference between the price initially paid by the wholesalers and the discounted price paid by the contracted customers. In addition to actual chargebacks received we maintain an accrual for chargebacks based on the estimated contractual discounts on the inventory levels on hand in our distribution channel. If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. Medicare Part D Coverage Gap: Medicare Part D prescription drug benefit mandates manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Our estimates for the expected Medicare Part D coverage gap are based on historical invoices received and in part from data received from our customers. Funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. If actual future funding varies from estimates, we may need to adjust prior period accruals, which would affect revenue in the period of adjustment. 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 acquired 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”). 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. Milestone and Contract Revenues Our license agreements, 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 as of the end of each reporting period. Once a performance condition is considered probable, we record compensation expense based on the portion of the service period elapsed to date with respect to that award, with a cumulative catch-up, net of estimated forfeitures, and recognize any remaining compensation expense, if any, over the remaining requisite service period using the straight-line attribution method for PSUs that are subject to cliff vesting and using the accelerated attribution method for PSUs that are subject to graded vesting. Long term Incentive Plans. We have long term incentive plans which provide eligible employees with the opportunity to receive performance and service-based incentive compensation, which may be comprised of cash, stock options, restricted stock units and/or performance shares. The payment of cash and the grant or vesting of equity may be contingent upon the achievement of pre-determined regulatory, sales and internal performance milestones.
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 (“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 February 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 842, Leases, that requires lessees to recognize assets and liabilities on the balance sheet for most leases including operating leases. Additionally, the FASB issued clarifying guidance to the topic in ASUs No. 2018-10, No. 2018-11, No. 2018-20 and No. 2019-01 which clarified certain aspects of the new leases standard and provided an optional transition method. The guidance requires that the lessees classify leases as either a finance or operating lease 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 ASC 840, with separate interest and amortization expense with higher interest 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 a single lease cost recognized on a straight-line basis. We implemented a third-party information technology application to facilitate activities for the new accounting and disclosure requirements and implemented new internal control procedures to support the new accounting and reporting processes associated with adopting the guidance. We elected the package of practical expedients and adopted utilizing the optional transition method as defined within ASU No. 2018-11. Accordingly, prior periods will not be restated to reflect the adopted standard. We did not elect the hindsight expedient. As a result of adoption on January 1, 2019, we recorded $23.6 million of lease right-of-use assets, $23.7 million of lease liabilities and an adjustment to retained earnings of $0.1 million. In addition, our capital lease assets and liabilities are now classified as finance lease right-of-use assets and liabilities. The capital asset and financing liability of $18.7 million recorded in 2018 related to the Morges office building and construction, described more fully in Note 7, was derecognized upon adoption. The adoption of the standard did not materially impact our consolidated net income and had no impact on our consolidated cash flows. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This guidance applies to all entities and impacts how entities account for credit losses for most financial assets and other instruments. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. The FASB released clarifying guidance in April 2019 within ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses,” and in May 2019 within ASU No. 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief.” The updates provide guidance on estimating credit losses, including transition relief by allowing for election of the fair value methodology on an instrument-by-instrument basis for eligible financial instruments within the scope of ASC 825-10. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods therein. Elections under ASU 2019-05 require a modified retrospective application through a cumulative-effect adjustment in the opening balance of retained earnings upon adoption. We are currently analyzing the impact of the ASUs on our condensed consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This guidance expanded the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services and supersedes the guidance in ASC 505-50. Under this new standard, nonemployee awards are measured on the grant date by estimating the fair value of the equity instruments to be issued rather than the fair value of the goods or services received. Entities may use the expected term when estimating the fair value of a nonemployee option or elect to use the contractual term as the expected term, on an award-by-award basis. The cumulative effect of the transition adjustment is to be recorded as an adjustment to retained earnings as of the beginning of the annual period of adoption. We adopted this standard for the period beginning January 1, 2019 and concluded there to be no change in our previous accounting for nonemployee awards and no impact on our condensed consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General,” an update to Subtopic ASC 715-20. The guidance amended year-end disclosure requirements related to defined benefit pension plans, and does not affect interim disclosures. The guidance is effective for fiscal years ending after December 15, 2020, and is permitted for early adoption. The standard is to be applied on a retrospective basis. Incyte sponsors defined benefit plans for employees located in Europe. We are currently analyzing the impact of ASU No. 2018-14 on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software,” an update to Subtopic ASC 350-40. The guidance directs accounting for service contracts for cloud computing arrangements to follow guidance within ASC 350-40 to determine capitalization of implementation costs. The guidance is effective for fiscal years beginning after December 15, 2019, and is permitted for early adoption. The standard may be applied on either a retrospective or prospective basis. We are currently analyzing the impact of ASU No. 2018-15 on our condensed consolidated financial statements. In August 2018, the SEC issued a final rule Release No. 33-10532, “Disclosure Update and Simplification,” to amend certain disclosure requirements now seen as redundant, duplicative, overlapping, outdated or superseded in the wake of recent accounting pronouncements. The amended rules became effective November 5, 2018. We analyzed the release in preparation of our Form 10-Q during the first interim period in 2019, which resulted in the additional disclosure of changes to stockholders’ equity during interim periods, as presented within the condensed consolidated statements of stockholders’ equity. We note that many of the amended requirements under this Release are not applicable to the Company, as we do not make dividend payments to stockholders, currently report our activities under a single business segment, and already provided all other significant disclosure requirements. In November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606.” The guidance clarifies the interactions between Topic 808 and Topic 606, including clarifications on revenue recognition, unit of account, and reporting disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2019, and is permitted for early adoption. The standard is to be applied on a retrospective basis to the date of the initial application of Topic 606. We utilize collaborative arrangements as described in our license agreements footnote and are currently analyzing the impact of ASU No. 2018-18 on our condensed consolidated financial statements.

Revenues (Tables)

6 Months Ended

Jun. 30, 2019

Revenues

Schedule of disaggregated revenue

The following table presents our disaggregated revenue for the periods presented (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
JAKAFI revenues, net	$	409,506	$	345,624	$	785,117	$	659,344
ICLUSIG revenues, net		24,391		19,900		45,029		40,685
Total product revenues, net		433,897		365,524		830,146		700,029
JAKAVI product royalty revenues		56,895		47,101		102,466		88,438
OLUMIANT product royalty revenues		19,140		8,852		35,177		15,231
Total product royalty revenues		76,035		55,953		137,643		103,669
Milestone and contract revenues		20,000		100,000		60,000		100,000
Other revenues		—		39		—		100
Total revenues	$	529,932	$	521,516	$	1,027,789	$	903,798

Fair value of financial instruments (Tables)

6 Months Ended

Jun. 30, 2019

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, 2019
Cash and cash equivalents	$	1,416,224	$	—	$	—	$	1,416,224
Debt securities (corporate and government)		—		279,631		—		279,631
Long term investments (Note 9)		115,563		—		—		115,563
Total assets	$	1,531,787	$	279,631	$	—	$	1,811,418


	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, 2018
Cash and cash equivalents	$	1,163,980	$	—	$	—	$	1,163,980
Debt securities (corporate and government)		—		274,343		—		274,343
Long term investment (Note 9)		99,199		—		—		99,199
Total assets	$	1,263,179	$	274,343	$	—	$	1,537,522

Schedule of fair value of liabilities measured on recurring basis

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


	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		June 30, 2019
Acquisition-related contingent consideration	$	—	$	—	$	286,000	$	286,000
Total liabilities	$	—	$	—	$	286,000	$	286,000


	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Liabilities		Inputs		Inputs		Balance as of
	(Level 1)		(Level 2)		(Level 3)		December 31, 2018
Acquisition-related contingent consideration	$	—	$	—	$	287,001	$	287,001
Total liabilities	$	—	$	—	$	287,001	$	287,001

Schedule of roll forward of Level 3 liabilities

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


Balance at January 1, 2019	$	287,001
Contingent consideration earned during the period but not yet paid		(7,608)
Payments made during the period		(6,672)
Change in fair value of contingent consideration		13,279
Balance at June 30, 2019	$	286,000

Summary of marketable securities portfolio

The following is a summary of our marketable security portfolio (in thousands):


			Net		Net
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
June 30, 2019
Debt securities (corporate and government)	$	279,553	$	78	$	—	$	279,631

December 31, 2018
Debt securities (corporate and government)	$	275,405	$	—	$	(1,062)	$	274,343

Concentration of credit risk (Tables)	6 Months Ended
Concentration of credit risk (Tables)	Jun. 30, 2019
Schedule of concentration of credit risk related to collaborative partners	The concentration of credit risk related to our collaborative partners is as follows:
Schedule of concentration of credit risk related to specialty pharmacy customers	The concentration of credit risk related to our JAKAFI product revenues is as follows:

Inventory (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of inventory

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


	June 30,		December 31,
	2019		2018
Raw materials	$	1,766	$	481
Work-in-process		6,929		3,488
Finished goods		3,998		6,436
		12,693		10,405
Inventories-current		6,527		6,967
Inventories-noncurrent	$	6,166	$	3,438

Property and equipment, net (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of property and equipment, net

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


	June 30,		December 31,
	2019		2018
Office equipment	$	15,240	$	16,955
Laboratory equipment		65,439		61,697
Computer equipment		56,687		55,436
Land		10,161		10,122
Building and leasehold improvements		211,346		213,196
Operating lease right-of-use assets		27,622		—
Construction in progress		69,038		65,576
		455,533		422,982
Less accumulated depreciation and amortization		(116,411)		(103,231)
Property and equipment, net	$	339,122	$	319,751

Summary of lease liability

As of June 30, 2019 our lease liabilities are as follows (in thousands):


Current
Operating lease liabilities	$	10,832
Finance lease liabilities		791
Noncurrent
Operating lease liabilities		13,284
Finance lease liabilities		31,643
Total lease liabilities	$	56,550

Summary of maturity of our lease liabilities

The maturity of our lease liabilities are as follows (in thousands):


	Operating		Finance
Remainder of 2019	$	6,771	$	449
2020		7,901		697
2021		5,121		2,454
2022		2,831		2,706
2023		1,588		2,713
After 2023		1,346		35,262
Total lease cash payments	$	25,558	$	44,281
Less: discount		1,442		11,847
Present value of lease liabilities	$	24,116	$	32,434

Intangible assets and goodwill (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of finite-lived intangible assets, net

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

Balance at June 30, 2019

Balance at December 31, 2018

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

66,404

204,596

271,000

55,636

215,364

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
		2019		2020		2021		2022		2023		Thereafter
Amortization expense	$	10,771	$	21,536	$	21,536	$	21,536	$	21,536	$	107,681

Stock compensation (Tables)

6 Months Ended

Jun. 30, 2019

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

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


	Employee Stock Options								Employee Stock Purchase Plan
	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended				For the Six Months Ended
	June 30,								June 30,
	2019		2018		2019		2018		2019		2018		2019		2018
Average risk-free interest rates	2.26	%	2.71	%	2.49	%	2.47	%	1.75	%	2.52	%	2.10	%	2.50	%
Average expected life (in years)	5.55		5.37		5.34		5.50		0.50		0.50		0.50		0.50
Volatility	39	%	46	%	45	%	45	%	37	%	30	%	34	%	51	%
Weighted-average fair value (in dollars)	30.92		28.65		31.47		39.47		13.11		12.11		13.69		16.25

Schedule of option activity under the 2010 Stock Plan

Option activity under the 2010 Stock Plan was as follows:


	Shares Subject to
	Outstanding Options
		Weighted Average
	Shares	Exercise Price
Balance at December 31, 2018	12,285,159	$	74.39
Options granted	2,429,688	$	73.23
Options exercised	(1,178,225)	$	26.93
Options cancelled	(567,093)	$	91.76
Balance at June 30, 2019	12,969,529	$	77.72

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

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


	Shares Subject to
	Outstanding Awards
	Shares	Grant Date Value
Balance at December 31, 2018	2,043,337	$	80.35
RSUs granted	193,950	$	74.74
PSUs granted	100,000	$	74.38
PSUs achieved	44,940	$	65.76
RSUs cancelled	(83,723)	$	85.58
PSUs cancelled	(22,764)	$	66.44
RSUs released	(316,325)	$	87.99
Balance at June 30, 2019	1,959,415	$	77.86

Summary of share activity

The following table summarizes our shares available for grant:


		Shares Available
		for Grant
Balance at December 31, 2018		7,023,328
Additional authorization		7,700,000
Options, RSUs and PSUs granted		(2,891,106)
Options, RSUs and PSUs cancelled		673,580
Balance at June 30, 2019		12,505,802

Accrued and other current liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of accrued and other current liabilities

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


	June 30,		December 31,
	2019		2018
Royalties	$	34,376	$	25,087
Clinical related costs		64,963		98,607
Sales allowances		60,890		44,770
Construction in progress		2,847		7,673
Financing lease liability		—		18,696
Other current liabilities		47,398		34,568
Total accrued and other current liabilities	$	210,474	$	229,401

Debt (Tables)

6 Months Ended

Jun. 30, 2019

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, 2019		Maturities	2019		2018
1.25% Convertible Senior Notes due 2020	1.25	%	2020	$	17,862	$	17,434
					17,862		17,434
Less current portion					—		—
				$	17,862	$	17,434

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, 2019				December 31, 2018
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
1.25% Convertible Senior Notes due 2020	$	17,862	$	31,695	$	17,434	$	25,073
	$	17,862	$	31,695	$	17,434	$	25,073

- 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://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
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-Name Accounting Standards Codification
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-Section 45
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-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21506-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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-SubTopic 10
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-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
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Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
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-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21538-112644

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
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-Section 55
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-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

Employee benefit plans (Tables)

6 Months Ended

Jun. 30, 2019

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,
	2019		2018		2019		2018
Service cost	$	1,288	$	1,032	$	2,550	$	2,111
Interest cost		86		68		169		139
Expected return on plan assets		(61)		(47)		(120)		(97)
Amortization of prior service cost		62		45		107		90
Amortization of actuarial losses		46		66		112		132
Net periodic benefit cost	$	1,421	$	1,164	$	2,818	$	2,375

Net income per share (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of calculation of net income per share

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)		2019	2018			2019	2018
Basic Net Income Per Share
Basic net income	$	105,318	$	52,394	$	207,630	$	11,254
Weighted average common shares outstanding		214,620		212,210		214,342		211,945

Basic net income per share	$	0.49	$	0.25	$	0.97	$	0.05

Diluted Net Income Per Share
Diluted net income	$	105,318	$	52,394	$	207,630	$	11,254
Weighted average common shares outstanding		214,620		212,210		214,342		211,945

Dilutive stock options and awards		2,863		2,893		2,932		3,349

Weighted average shares used to compute diluted net income per share		217,483		215,103		217,274		215,294

Diluted net income per share	$	0.48	$	0.24	$	0.96	$	0.05

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

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,
	2019	2018	2019	2018
Outstanding stock options and awards	9,165,776	8,079,446	9,221,941	6,732,551
Common shares issuable upon conversion of the 2018 Notes	—	148,817	—	148,817
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 income (loss) per share computation	9,534,715	8,597,202	9,590,880	7,250,307

Organization and business (Details)	6 Months Ended
Organization and business (Details)	Jun. 30, 2019 segment
Organization and Business
Number of operating segments	1

Summary of significant accounting policies - Narrative 1 (Details)	6 Months Ended
	Jun. 30, 2019 instrument issuer item
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
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 - Revenue Recognition (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Revenue recognition
Accrued sales allowances	$ 60.9	$ 44.8
Percentage of Medicare Part D insurance coverage gap mandate to be funded by manufacturers	70.00%
ICLUSIG
Revenue recognition
Amortization period	12 years 6 months

Summary of significant accounting policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Recent Accounting Pronouncements
Lease liabilities	$ 56,550
Retained earnings	$ (1,670,034)		$ (1,877,759)
Capital lease obligation			18,696
Office Building in Morges, Switzerland \| Building and leasehold improvements
Recent Accounting Pronouncements
Capital lease asset			18,700
Capital lease obligation			$ 18,700
ASU No. 2016-02 \| Restatement Adjustment
Recent Accounting Pronouncements
Lease right-of-use assets		$ 23,600
Lease liabilities		23,700
Retained earnings		$ 100

Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Revenues (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Total revenues	$ 529,932	$ 521,516	$ 1,027,789	$ 903,798
Product revenues, net
Revenues
Total revenues	433,897	365,524	830,146	700,029
JAKAFI
Revenues
Total revenues	409,506	345,624	785,117	659,344
ICLUSIG
Revenues
Total revenues	24,391	19,900	45,029	40,685
Product royalty revenues
Revenues
Total revenues	76,035	55,953	137,643	103,669
JAKAVI Royalty Revenues
Revenues
Total revenues	56,895	47,101	102,466	88,438
OLUMIANT Royalty Revenues
Revenues
Total revenues	19,140	8,852	35,177	15,231
Milestone and contract revenues
Revenues
Total revenues	$ 20,000	100,000	$ 60,000	100,000
Other revenues
Revenues
Total revenues		$ 39		$ 100

Fair value of financial instruments - Fair value on a recurring basis (Details) (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended	12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Fair value of financial instruments
Assets transfers from Level 1 to Level 2	$ 0				$ 0
Assets transfers from Level 2 to Level 1	0				0
Assets transfers into Level 3					0
Assets transfers out of Level 3					0
Liabilities transfers from Level 1 to Level 2	0				0
Liabilities transfers from Level 2 to Level 1	0				0
Liabilities transfers into Level 3					0
Liabilities transfers out of Level 3					0
Long term investments	115,563		$ 99,199		115,563	$ 99,199
ARIAD
Roll forward of Level 3 liabilities
Contingent consideration earned during the period but not yet paid	(7,600)					(13,200)
ARIAD \| Account payable
Roll forward of Level 3 liabilities
Contingent consideration earned during the period but not yet paid				$ (6,700)
ARIAD \| Accrued and other current liabilities
Roll forward of Level 3 liabilities
Contingent consideration earned during the period but not yet paid	(7,600)	$ (6,700)	(6,500)
Level 3 \| Fair Value
Roll forward of Level 3 liabilities
Balance at the beginning of the period		$ 287,001			287,001
Contingent consideration earned during the period but not yet paid					(7,608)
Payments made during the period					(6,672)
Change in fair value of contingent consideration					13,279
Balance at the end of the period	286,000		287,001		286,000	287,001
Recurring \| Fair Value
Fair value of financial instruments
Cash and cash equivalents	1,416,224		1,163,980		1,416,224	1,163,980
Debt securities (corporate and government)	279,631		274,343		279,631	274,343
Long term investments	115,563		99,199		115,563	99,199
Total assets	1,811,418		1,537,522		1,811,418	1,537,522
Acquisition-related contingent consideration	286,000		287,001		286,000	287,001
Total liabilities	286,000		287,001		286,000	287,001
Recurring \| Level 1
Fair value of financial instruments
Cash and cash equivalents	1,416,224		1,163,980		1,416,224	1,163,980
Long term investments	115,563		99,199		115,563	99,199
Total assets	1,531,787		1,263,179		1,531,787	1,263,179
Recurring \| Level 2
Fair value of financial instruments
Debt securities (corporate and government)	279,631		274,343		279,631	274,343
Total assets	279,631		274,343		279,631	274,343
Recurring \| Level 3
Fair value of financial instruments
Acquisition-related contingent consideration	286,000		287,001		286,000	287,001
Total liabilities	$ 286,000		$ 287,001		$ 286,000	$ 287,001

Fair value of financial instruments - Marketable securities portfolio (Details) (Details) - Debt securities (corporate and government) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Summary of marketable security portfolio
Amortized Cost	$ 279,553	$ 275,405
Net Unrealized Gains	78
Net Unrealized Losses		(1,062)
Estimated Fair Value	$ 279,631	$ 274,343
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, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Milestone Revenues \| Customer Concentration Risk \| Collaboration Partner B
Concentration of risk
Percentage of concentration risk		100.00%		100.00%
Milestone Revenues \| Customer Concentration Risk \| Collaboration Partner C
Concentration of risk
Percentage of concentration risk	100.00%		100.00%
Net Product Revenues \| Customer Concentration Risk \| Customer A
Concentration of risk
Percentage of concentration risk	20.00%	21.00%	19.00%	21.00%
Net Product Revenues \| Customer Concentration Risk \| Customer B
Concentration of risk
Percentage of concentration risk	13.00%	15.00%	14.00%	14.00%
Net Product Revenues \| Customer Concentration Risk \| Customer C
Concentration of risk
Percentage of concentration risk	16.00%	14.00%	16.00%	14.00%
Net Product Revenues \| Customer Concentration Risk \| Customer D
Concentration of risk
Percentage of concentration risk	11.00%	12.00%	12.00%	11.00%
Accounts Receivable \| Credit Concentration Risk \| Collaboration Partner A and B
Concentration of risk
Percentage of concentration risk					42.00%
Accounts Receivable \| Credit Concentration Risk \| Collaboration Partner A, B and C
Concentration of risk
Percentage of concentration risk			27.00%
Accounts Receivable \| Credit Concentration Risk \| Customer A, B, C and D
Concentration of risk
Percentage of concentration risk			36.00%		30.00%

Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Raw materials	$ 1,766	$ 481
Work-in-process	6,929	3,488
Finished goods	3,998	6,436
Total inventories	12,693	10,405
Inventories - current	6,527	6,967
Inventories-noncurrent	$ 6,166	$ 3,438

Property and equipment, net - Property and equipment, net (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Property and equipment, net
Property and Equipment, gross	$ 455,533	$ 422,982
Less accumulated depreciation and amortization	(116,411)	(103,231)
Property and Equipment, net	339,122	319,751
Office equipment
Property and equipment, net
Property and Equipment, gross	15,240	16,955
Laboratory equipment
Property and equipment, net
Property and Equipment, gross	65,439	61,697
Computer equipment
Property and equipment, net
Property and Equipment, gross	56,687	55,436
Land
Property and equipment, net
Property and Equipment, gross	10,161	10,122
Building and leasehold improvements
Property and equipment, net
Property and Equipment, gross	211,346	213,196
Operating lease right-of-use assets
Property and equipment, net
Property and Equipment, gross	27,622
Construction in Progress
Property and equipment, net
Property and Equipment, gross	$ 69,038	$ 65,576

Property and equipment, net - Narrative (Details) $ in Thousands	1 Months Ended	6 Months Ended
	Jul. 31, 2018 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Feb. 28, 2018 ft²
Property and equipment, net
Financing lease liabilities		$ 32,434
Finance lease right-of use assets, net		30,348
Costs for architectural and engineering studies and initial ground preparation		455,533	$ 422,982
Construction in Progress
Property and equipment, net
Costs for architectural and engineering studies and initial ground preparation		$ 69,038	$ 65,576
Office Building in Morges, Switzerland
Property and equipment, net
Initial lease term				15 years
Options to extend		true
Renewal term of agreement to rent				20 years
Square footage \| ft²				100,000
Financing lease liabilities		$ 31,100
Finance lease right-of use assets, net		29,100
Finance Lease, Lease Incentive Receivable		2,000
Site preparation, design and construction costs		3,900
Land in Y-PARC, Switzerland's largest technology park, Yverdon
Property and equipment, net
Purchase price	$ 4,800
Land in Y-PARC, Switzerland's largest technology park, Yverdon \| Construction in Progress
Property and equipment, net
Costs for architectural and engineering studies and initial ground preparation		$ 55,200

Property and equipment, net - Lease and maturity of lease liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Lease liabilities
Lessee, Operating Lease, Existence of Residual Value Guarantee [true false]			false
Lessee, Operating Lease, Existence of Option to Extend [true false]			true
Operating lease liabilities, current	$ 10,832		$ 10,832
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accrued Liabilities, Current		Accrued Liabilities, Current
Finance lease liabilities, current	$ 791		$ 791
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	Finance lease liabilities, current		Finance lease liabilities, current
Operating lease liabilities, noncurrent	$ 13,284		$ 13,284
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other Liabilities, Noncurrent		Other Liabilities, Noncurrent
Finance lease liabilities, noncurrent	$ 31,643		$ 31,643
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Finance lease liabilities, noncurrent		Finance lease liabilities, noncurrent
Total lease liabilities	$ 56,550		$ 56,550
Cash paid for operating lease liabilities			5,400
Cash paid for financing lease liabilities in financing cash flows			409
Maturity of our operating lease liabilities
Remainder of 2019	6,771		6,771
2020	7,901		7,901
2021	5,121		5,121
2022	2,831		2,831
2023	1,588		1,588
After 2023	1,346		1,346
Total lease cash payments	25,558		25,558
Less: discount	1,442		1,442
Present value of lease liabilities	24,116		24,116
Maturity of our finance lease liabilities
Remainder of 2019	449		449
2020	697		697
2021	2,454		2,454
2022	2,706		2,706
2023	2,713		2,713
After 2023	35,262		35,262
Total lease cash payments	44,281		44,281
Less: discount	11,847		11,847
Present value of lease liabilities	$ 32,434		$ 32,434
Weighted average lease term, finance leases	16 years		16 years
Weighted average lease term, operating leases	4 years 6 months		4 years 6 months
Weighted average discount rate, operating leases	3.70%		3.70%
Weighted average discount rate, finance leases	4.70%		4.70%
Expense related to our operating leases	$ 3,600		$ 7,300
Amortization on our finance lease right-of-use assets	$ 200		$ 400
Rent expense		$ 3,700		$ 7,000

Intangible assets and goodwill (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Amortization Expense
Remainder of 2019	$ 10,771
2020	21,536
2021	21,536
2022	21,536
2023	21,536
Thereafter	107,681
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	66,404	55,636
Net Carrying Amount	$ 204,596	$ 215,364

License agreements - Novartis (Details) $ in Thousands	1 Months Ended					3 Months Ended		6 Months Ended		12 Months Ended									116 Months Ended
License agreements - Novartis (Details) $ in Thousands	Apr. 30, 2016 USD ($)	Sep. 30, 2014 USD ($)	Jan. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)	Nov. 30, 2009 USD ($) item	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	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, 2019 USD ($)
License agreements
Revenues						$ 529,932	$ 521,516	$ 1,027,789	$ 903,798
JAKAFI
License agreements
Revenues						409,506	345,624	785,117	659,344
Novartis
License agreements
Upfront and immediate milestone payment to be received under license agreement					$ 210,000
Upfront payment received under license agreement				$ 150,000
Immediate milestone payment received under license agreement			$ 60,000
Revenues						0		0
Royalties payable						26,800		26,800		$ 18,600									$ 26,800
Number of deliverables under license agreement \| item					2
Reimbursable costs recorded as deferred revenue				$ 10,900
Reimbursable costs included in accounts receivable						300		300		700									300
Research and development expenses reimbursed						400	700	1,000	1,200
Product royalties in accounts receivable						56,900		56,900		55,400									56,900
Novartis \| Pre-specified Events \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					$ 1,200,000
Novartis \| Development Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone																			132,000
Novartis \| Development Milestones \| Phase III
License agreements
Amount recognized and received for the achievement of a predefined milestone																		$ 50,000
Novartis \| Development Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					174,000
Novartis \| Regulatory Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone																			215,000
Novartis \| Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					495,000
Novartis \| Commercialization Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone										60,000									$ 120,000
Revenues										$ 900,000
Novartis \| Commercialization Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement					$ 500,000
Novartis \| LY3009104 \| Development Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone													$ 5,000	$ 7,000	$ 25,000		$ 15,000
Novartis \| GVHD \| Development Milestones \| Phase III
License agreements
Amount recognized and received for the achievement of a predefined milestone											$ 25,000
Novartis \| GVHD \| Development and Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement	$ 75,000
Novartis \| GVHD \| Development and Commercialization Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone												$ 5,000
Novartis \| JAKAFI \| U.S.
License agreements
Royalties payable on net sales						20,100	16,900	33,500	27,300
Novartis \| JAKAFI \| Regulatory Milestones \| Europe
License agreements
Amount recognized and received for the achievement of a predefined milestone												$ 40,000	25,000	60,000		$ 40,000
Novartis \| JAKAFI \| Regulatory Milestones \| JAPAN
License agreements
Amount recognized and received for the achievement of a predefined milestone														$ 25,000
Novartis \| JAKAFI \| Regulatory Milestones \| U.S.
License agreements
Amount recognized and received for the achievement of a predefined milestone																	$ 10,000
Novartis \| JAKAVI
License agreements
Revenues						$ 56,900	$ 47,100	$ 102,500	$ 88,400
Novartis \| JAKAVI \| Minimum
License agreements
Royalty payments on future global net sales (as a percent)								12.00%
Novartis \| JAKAVI \| Maximum
License agreements
Royalty payments on future global net sales (as a percent)								14.00%
Novartis \| JAKAVI \| Regulatory Milestones \| Europe
License agreements
Amount recognized and received for the achievement of a predefined milestone		$ 60,000
Novartis \| JAKAVI \| Regulatory Milestones \| JAPAN
License agreements
Amount recognized and received for the achievement of a predefined milestone													15,000
Novartis \| JAKAVI \| Commercialization Milestones
License agreements
Amount recognized and received for the achievement of a predefined milestone											40,000		20,000
Revenues											$ 600,000		$ 300,000

License agreements - Lilly (Details) $ in Thousands	1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended					115 Months Ended
License agreements - Lilly (Details) $ in Thousands	May 31, 2019 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2009 USD ($) item	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2010 USD ($)	Jun. 30, 2019 USD ($)
License agreements
Research and Development Expense				$ 289,363	$ 298,089	$ 559,908	$ 601,192
Revenues				529,932	521,516	1,027,789	903,798
Product royalty revenues
License agreements
Revenues				76,035	$ 55,953	137,643	$ 103,669
Eli Lilly
License agreements
Upfront payment received under license agreement			$ 90,000
Research and Development Expense				0		0
Number of deliverables under license agreement \| item			2
Product royalties in accounts receivable				$ 19,500		$ 19,500		$ 14,000					$ 19,500
Eli Lilly \| Phase IIB
License agreements
Funding of future development costs (as a percent)				30.00%	30.00%	30.00%	30.00%
Research and Development Expense					$ 14,200		$ 26,700
Accrued and other liabilities				$ 0		$ 0		23,100					0
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								20,000	$ 30,000				149,000
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 \| GVHD \| Regulatory Milestones
License agreements
Milestone payment made under license agreement	$ 20,000
Eli Lilly \| Product royalty revenues
License agreements
Revenues				19,100	8,900	35,200	15,300
Eli Lilly \| Milestone revenues
License agreements
Revenues				$ 0	$ 100,000	$ 0	$ 100,000

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 shares	Feb. 28, 2017 USD ($)	Nov. 30, 2015 item	Feb. 28, 2015	Jan. 31, 2015 USD ($) item	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)
License agreements
Long term investment							$ 115,563			$ 115,563			$ 99,199
Research and development expense							289,363		$ 298,089	559,908	$ 601,192
Unrealized gain (loss) on long term investments							(4,625)		(34,641)	16,364	(11,962)
Current assets							2,058,625			2,058,625			1,832,254
Current liabilities							367,105			367,105			425,277
Cash and cash equivalents							1,416,224			$ 1,416,224			1,163,980
Agenus
License agreements
Number of program targets \| item				3		4
Royalty payments on future global net sales (as a percent)										15.00%
Upfront payment under license agreement						$ 60,000
Period of notice for termination of license agreement			12 months
Agenus \| Development, Regulatory and Commercialization Milestones \| Minimum
License agreements
Royalty payments on future global net sales (as a percent)										6.00%
Agenus \| Development, Regulatory and Commercialization Milestones \| Maximum
License agreements
Royalty payments on future global net sales (as a percent)										12.00%
Additional milestone payments under the license agreement			$ 510,000
Agenus \| Development Milestones
License agreements
Upfront payment under license agreement												$ 20,000
Additional milestone payments under the license agreement									5,000		5,000			$ 5,000
Agenus
License agreements
Long term investment							53,300			$ 53,300			42,300
Research and development expense							$ 500		900	$ 900	2,800
Shares owned following stock purchase (as a percent)			11.00%		9.00%
Ownership percentage (as a percent)							16.00%			16.00%
Unrealized gain (loss) on long term investments							$ 500		$ (43,300)	$ 11,000	$ (17,600)
Total revenues								$ 79,900
Net income (loss)								$ 17,400
Agenus \| Accrued and other liabilities
License agreements
Accrued and other liabilities							$ 1,800			$ 1,800			$ 2,300
Agenus \| Stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares		10.0
Purchase price of common stock		$ 60,000
Per share price \| $ / shares	$ 4.40	$ 6.00
Discount for lack of marketability	$ 4,500
Fair value of shares on the issuance date	39,500
Total consideration paid	$ 60,000
Long term investment												39,500
Research and development expense												$ 20,500

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 ($)	Jan. 31, 2017 USD ($)	Dec. 31, 2016 USD ($) $ / shares shares	Jun. 30, 2019 USD ($)	Mar. 31, 2019 EUR (€)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($)
License agreements
Long term investment					$ 115,563			$ 115,563			$ 99,199
Research and development expense					289,363		$ 298,089	559,908	$ 601,192
Unrealized gain (loss) on long term investments					(4,625)		(34,641)	16,364	(11,962)
Current assets					2,058,625			2,058,625			1,832,254
Current liabilities					367,105			367,105			425,277
Merus
License agreements
Associated future global development costs , if elected to co-develop (as a percent)			35.00%
Upfront payment under license agreement		$ 120,000
Research and development expense					1,700		2,800	4,300	5,200
Merus \| Accrued and other liabilities
License agreements
Accrued and other liabilities					1,600			1,600			2,900
Merus \| U.S.
License agreements
Profit sharing (as a percent)			50.00%
Percentage of profit (losses)			50.00%
Merus \| Minimum
License agreements
Royalty payments on future global net sales (as a percent)			6.00%
Merus \| Minimum \| U.S.
License agreements
Royalty payments on future global net sales (as a percent)			6.00%
Merus \| Minimum \| Non-U.S.
License agreements
Royalty payments on future global net sales (as a percent)			6.00%
Merus \| Maximum
License agreements
Royalty payments on future global net sales (as a percent)			10.00%
Percentage of reverse royalty			4.00%
Merus \| Maximum \| U.S.
License agreements
Royalty payments on future global net sales (as a percent)			10.00%
Percentage of additional royalties			4.00%
Merus \| Maximum \| Non-U.S.
License agreements
Royalty payments on future global net sales (as a percent)			10.00%
Merus \| Maximum \| Development and Regulatory Milestones
License agreements
Additional milestone payments under the license agreement			$ 100,000
Merus \| Maximum \| Commercialization Milestones
License agreements
Additional milestone payments under the license agreement			$ 250,000
Merus
License agreements
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
Long term investment	$ 72,800
Research and development expense										$ 7,200
Fair market value of our long term investments					$ 46,900			$ 46,900			$ 44,800
Ownership percentage (as a percent)					14.00%			14.00%
Unrealized gain (loss) on long term investments					$ (400)		$ 13,500	$ 2,100	$ 10,800
Total revenues \| €						€ 7.7
Net loss \| €						€ (6.2)
Merus \| Stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares				3.2
Purchase price of common stock				$ 80,000
Per share price \| $ / shares				$ 25.00
Lock-up period	18 months
Standstill period								3 years
Percentage of total shares allowed to sell during any 12-month period (as a percent)	33.00%
Percentage of total shares allowed to sell during any three-month period (as a percent)	10.00%

License agreements - Calithera (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions			1 Months Ended		3 Months Ended				6 Months Ended		12 Months Ended
	Jan. 01, 2018	Jan. 30, 2017	Mar. 31, 2017	Jan. 31, 2017	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2017	Dec. 31, 2018	Jan. 01, 2017
License agreements
Long term investment					$ 115,563				$ 115,563			$ 99,199
Research and development expense					289,363		$ 298,089		559,908	$ 601,192
Net income					105,318	$ 102,312	52,394	$ (41,140)	207,630	11,254
Unrealized gain (loss) on long term investments					(4,625)		(34,641)		16,364	(11,962)
Calithera
License agreements
Funding of future development costs (as a percent)				70.00%
Upfront payment made under license agreement				$ 45,000
Potential milestone payments to be made with profit sharing in effect				430,000
Potential milestone payments to be made with profit sharing terminated				$ 750,000
Milestone payment made under license agreement			$ 12,000
Research and development expense					5,400		3,200		10,000	5,800
Calithera \| Accrued and other liabilities
License agreements
Accrued and other liabilities					2,400				2,400
Calithera \| U.S.
License agreements
Percentage of profit (losses)				60.00%
Calithera
License agreements
Total consideration paid		$ 53,000		$ 53,000
Long term investment					$ 6,700				$ 6,700			6,900
Ownership percentage (as a percent)					4.00%				4.00%
Calithera \| Other Comprehensive Income
License agreements
Unrealized gain (loss) on long term investments					$ (4,900)		$ (2,200)		$ (200)	$ (5,800)
Calithera \| Calithera \| Accrued and other liabilities
License agreements
Accrued and other liabilities												$ 2,600
Calithera \| Stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares )				1.7
Purchase price of common stock													$ 8,000
Per share price		$ 6.75											$ 4.65
Fair market value of our long term investments		$ 11,600
Stock purchase price				$ 8,000
Long term investment											$ 11,600
Research and development expense											$ 41,400
Calithera \| Collaboration and license agreement
License agreements
Upfront license fees				$ 45,000
Calithera \| ASU 2016-01
License agreements
Net income	$ 2,800

License agreements - MacroGenics (Details) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended		6 Months Ended
	Nov. 30, 2018	Sep. 30, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
License agreements
Research and development				$ 289,363	$ 298,089	$ 559,908	$ 601,192
MacroGenics
License agreements
Upfront payment under license agreement			$ 150,000
Research and development	$ 5,000	$ 10,000		9,800	$ 10,900	19,200	$ 17,400
MacroGenics \| Accrued and other liabilities
License agreements
Accrued and other liabilities				$ 2,600		$ 2,600		$ 3,200
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 shares	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Feb. 28, 2018 USD ($)	Jan. 08, 2018 $ / shares
License agreements
Long term investment		$ 115,563		$ 115,563		$ 99,199
Research and development expense		289,363	$ 298,089	559,908	$ 601,192
Unrealized gain (loss) on long term investments		(4,625)	(34,641)	16,364	(11,962)
Syros Pharmaceuticals, Inc.
License agreements
Number of program targets \| item	7
Upfront payment under license agreement	$ 10,000
Long term investment		$ 8,700		$ 8,700		$ 5,200
Ownership percentage (as a percent)		2.00%		2.00%
Unrealized gain (loss) on long term investments		$ 200	$ (2,600)	$ 3,500	$ 600
Syros Pharmaceuticals, Inc. \| Stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares	0.8
Purchase price of common stock	$ 10,000
Per share price \| $ / shares	$ 12.61							$ 9.77
Lock-up period	12 months
Discount for lack of marketability	$ 100
Fair value of shares on the issuance date	7,600
Long term investment	7,600
Research and development expense	$ 2,400
Syros Pharmaceuticals, Inc. \| Amended stock purchase agreement
License agreements
Purchase of common stock under Stock Purchase Agreement (in shares ) \| shares	0.1
Purchase price of common stock	$ 1,400
Per share price \| $ / shares	$ 9.55
Long term investment							$ 1,400
Syros Pharmaceuticals, Inc. \| Maximum
License agreements
Target selection and option exercise fee payment	$ 54,000
Syros Pharmaceuticals, Inc. \| Development and Regulatory Milestones \| Maximum
License agreements
Additional milestone payments under the license agreement	50,000
Syros Pharmaceuticals, Inc. \| Commercialization Milestones \| Maximum
License agreements
Additional milestone payments under the license agreement	$ 65,000

License agreements - Innovent (Details) - Innovent - USD ($) $ in Millions	1 Months Ended		6 Months Ended
	Jan. 31, 2019	Dec. 31, 2018	Jun. 30, 2019
License agreements
Upfront and immediate milestone payment to be received under license agreement	$ 40.0
Regulatory Milestones
License agreements
Milestone payment made under license agreement			$ 20.0
Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement		$ 20.0
Development and Regulatory Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement		129.0
Commercialization Milestones \| Maximum
License agreements
Upfront and immediate milestone payment to be received under license agreement		$ 202.5

Stock compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock compensation
Stock compensation expense	$ 40.6	$ 36.6	$ 81.2	$ 72.8
Stock Compensation Expense Capitalized	0.1		$ 0.2
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	27.6	24.8	$ 55.0	49.0
Selling, General and Administrative Expenses [Member]
Stock compensation
Stock compensation expense	12.8	$ 11.8	25.8	$ 23.8
Cost of product revenues
Stock compensation
Stock compensation expense	$ 0.2		$ 0.4
Stock Options
Weighted-average fair value assumptions
Average risk-free interest rates (as a percent)	2.26%	2.71%	2.49%	2.47%
Average expected life (in years)	5 years 6 months 18 days	5 years 4 months 13 days	5 years 4 months 2 days	5 years 6 months
Volatility (as a percent)	39.00%	46.00%	45.00%	45.00%
Weighted-average fair value (in dollars per share)	$ 30.92	$ 28.65	$ 31.47	$ 39.47
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 110.3		$ 110.3
Vesting period of recognition of the unrecognized compensation cost of nonvested awards			1 year 6 months
Restricted Stock Units (RSUs)
Weighted-average fair value assumptions
Average risk-free interest rates (as a percent)	1.75%	2.52%	2.10%	2.50%
Average expected life (in years)	6 months	6 months	6 months	6 months
Volatility (as a percent)	37.00%	30.00%	34.00%	51.00%
Weighted-average fair value (in dollars per share)	$ 13.11	$ 12.11	$ 13.69	$ 16.25
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 49.3		$ 49.3
Vesting period of recognition of the unrecognized compensation cost of nonvested awards			1 year 6 months
Performance Stock Units (PSUs)
Unrecognized compensation
Unrecognized compensation cost for nonvested option (in dollars)	$ 32.7		$ 32.7
Vesting period of recognition of the unrecognized compensation cost of nonvested awards			2 years 7 months 6 days

Stock compensation - Option activity (Details) - Stock Options - $ / shares	1 Months Ended	6 Months Ended
	Jul. 31, 2016	Jun. 30, 2019	Jun. 30, 2016
Shares Subject to Outstanding Options, Shares
Outstanding at the beginning of the period (in shares)		12,285,159
Options granted (in shares)		2,429,688
Options exercised (in shares)		(1,178,225)
Options cancelled (in shares)		(567,093)
Outstanding at the end of the period (in shares)		12,969,529
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)		$ 74.39
Options granted (in dollars per share)		73.23
Options exercised (in dollars per share)		26.93
Options cancelled (in dollars per share)		91.76
Outstanding at the end of the period (in dollars per share)		$ 77.72
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
	Apr. 30, 2019	Jul. 31, 2018	Jun. 30, 2018	Jun. 30, 2019
Shares Subject to Outstanding Options, Shares
Outstanding at the beginning of the period (in shares)				2,043,337
Outstanding at the end of the period (in shares)				1,959,415
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)				$ 80.35
Outstanding at the end of the period (in dollars per share)				$ 77.86
Restricted Stock Units (RSUs)
Shares Subject to Outstanding Options, Shares
Granted (in shares)			190,000	193,950
Cancelled (in shares)				(83,723)
Released (in shares)				(316,325)
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Granted (in dollars per share)				$ 74.74
Cancelled (in dollars per share)				85.58
Released (in dollars per share)				$ 87.99
Performance Stock Units (PSUs)
Shares Subject to Outstanding Options, Shares
Granted (in shares)	100,000	77,243	446,500	100,000
Achieved (in shares)				44,940
Cancelled (in shares)				(22,764)
Shares Subject to Outstanding Options, Weighted Average Exercise Price
Granted (in dollars per share)				$ 74.38
Achieved (in dollars per share)				65.76
Cancelled (in dollars per share)				$ 66.44

Stock compensation - RSU and PSU Narrative (Details) - USD ($) $ in Millions		1 Months Ended					3 Months Ended		6 Months Ended			12 Months Ended
	Mar. 31, 2019	Apr. 30, 2019	Jul. 31, 2018	Jun. 30, 2018	Jul. 31, 2016	Jan. 31, 2014	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2016	Dec. 31, 2018
Stock Compensation Plans
Allocated Share-based Compensation Expense							$ 40.6	$ 36.6	$ 81.2	$ 72.8
Assumed annualized forfeiture rate (as a percent)									5.00%
Stock Options
Stock Compensation Plans
Vesting period					4 years						3 years
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					193,950
Service period											3 years
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)									333,334
Outstanding (in shares)							66,666		66,666
Performance Stock Units (PSUs)
Stock Compensation Plans
Vesting period			4 years
Granted (in shares)		100,000	77,243	446,500					100,000
Multiplying factor												83.00%
Performance Stock Units (PSUs) \| Minimum
Stock Compensation Plans
Service period				3 years
Performance Stock Units (PSUs) \| Maximum
Stock Compensation Plans
Service period				4 years
Multiplying factor			150.00%
Performance Stock Units (PSUs) \| Long term incentive plan
Stock Compensation Plans
Granted (in shares)				106,500
Multiplying factor	142.00%
Performance Stock Units (PSUs) \| Long term incentive plan \| Maximum
Stock Compensation Plans
Multiplying factor				267.00%

Stock compensation - Shares available for grant (Details)	6 Months Ended
	Jun. 30, 2019 shares
Shares Available For Grant
Outstanding at the beginning of the period (in shares)	7,023,328
Additional authorization (in shares)	7,700,000
Options, RSUs and PSUs granted (in shares)	(2,891,106)
Options, RSUs and PSUs cancelled (in shares)	673,580
Outstanding at the end of the period (in shares)	12,505,802

Accrued and other current liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accrued and Other Current Liabilities
Royalties	$ 34,376	$ 25,087
Clinical related costs	64,963	98,607
Sales allowances	60,890	44,770
Construction in progress	2,847	7,673
Finance lease liabilities		18,696
Other current liabilities	47,398	34,568
Total accrued and other current liabilities	$ 210,474	$ 229,401

Debt - Components of convertible notes (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Convertible Notes
Convertible senior notes noncurrent	$ 17,862	$ 17,434
Carrying Amount
Convertible Notes
Convertible senior notes	17,862	17,434
Convertible senior notes noncurrent	$ 17,862	17,434
Convertible Senior Notes 1.25 Percent Due 2020
Convertible Notes
Interest rate of debt (as a percent)	1.25%
Convertible Senior Notes 1.25 Percent Due 2020 \| Carrying Amount
Convertible Notes
Convertible senior notes	$ 17,862	$ 17,434

Debt - Carrying amount and Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Carrying Amount
Convertible Notes
Convertible senior notes	$ 17,862	$ 17,434
Fair Value
Convertible Notes
Convertible senior notes	$ 31,695	25,073
Convertible Senior Notes 1.25 Percent Due 2020
Convertible Notes
Interest rate of debt (as a percent)	1.25%
Convertible Senior Notes 1.25 Percent Due 2020 \| Carrying Amount
Convertible Notes
Convertible senior notes	$ 17,862	17,434
Convertible Senior Notes 1.25 Percent Due 2020 \| Fair Value
Convertible Notes
Convertible senior notes	$ 31,695	$ 25,073

Debt - Narrative (Details) - Convertible Senior Notes 0.375 Percent Due 2018 and Convertible Senior Notes 1.25 Percent Due 2020	6 Months Ended
	Jun. 30, 2019 item
Convertible Notes
Number of days within 30 consecutive trading days in which the price of the entity's common stock must exceed the conversion price for the notes to be converted	20 days
Number of consecutive trading days during which the closing price of the entity's common stock must exceed the conversion price for at least 20 days in order for the notes to be convertible	30 days
Percentage of the closing sales price of common stock that the conversion price must exceed in order for the notes to be convertible (as a percent)	130.00%
Number of consecutive business days immediately after any five consecutive trading day period during the note measurement period	5
Number of consecutive trading days before five consecutive business days during the note measurement period	5
Conversion ratio, principal amount of note	1,000
Percentage of the trading price to the product of the last reported sale price of the common stock and the conversion rate, maximum (as a percent)	98.00%

Employee benefit plans - Defined Contribution Plan (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Defined Contribution Plan
Defined contribution expense	$ 3.1	$ 2.8	$ 6.0	$ 5.5

Employee benefit plans - Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Defined Benefit Pension Plan
Employer Service cost	$ 1,288	$ 1,032	$ 2,550	$ 2,111
Interest cost	86	68	169	139
Expected return on plan assets	(61)	(47)	(120)	(97)
Amortization of prior service cost	62	45	107	90
Amortization of actuarial losses	46	66	112	132
Net periodic benefit cost	$ 1,421	$ 1,164	$ 2,818	$ 2,375
Location of costs excluding the service component	us-gaap:OtherNonoperatingIncomeExpense	us-gaap:OtherNonoperatingIncomeExpense	us-gaap:OtherNonoperatingIncomeExpense	us-gaap:OtherNonoperatingIncomeExpense
Expected contributions	$ 3,500		$ 3,500
Accrued pension obligation	$ 16,200		$ 16,200		$ 15,700

Income taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Income taxes (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income tax (benefit) expense	$ 3,353	$ 1,614	$ 5,138	$ 2,400
Increase in unrecognized tax benefits			900
Additions related to prior periods tax positions			$ 200

Net income per share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Basic Net Income Per Share
Basic net income	$ 105,318	$ 52,394	$ 207,630	$ 11,254
Weighted average common shares outstanding	214,620,000	212,210,000	214,342,000	211,945,000
Basic net income per share	$ 0.49	$ 0.25	$ 0.97	$ 0.05
Diluted Net Income Per Share
Diluted net income	$ 105,318	$ 52,394	$ 207,630	$ 11,254
Weighted average common shares outstanding	214,620,000	212,210,000	214,342,000	211,945,000
Dilutive stock options and awards	2,863,000	2,893,000	2,932,000	3,349,000
Weighted average shares used to compute diluted net income per share	217,483,000	215,103,000	217,274,000	215,294,000
Diluted net income per share	$ 0.48	$ 0.24	$ 0.96	$ 0.05
Anti-dilutive securities
Potential common shares excluded from diluted net loss per share computation	9,534,715	8,597,202	9,590,880	7,250,307
Stock Options
Anti-dilutive securities
Potential common shares excluded from diluted net loss per share computation	9,165,776	8,079,446	9,221,941	6,732,551
Convertible Senior Notes 0.375 Percent Due 2018
Anti-dilutive securities
Potential common shares excluded from diluted net loss per share computation		148,817		148,817
Convertible Senior Notes 1.25 Percent Due 2020
Anti-dilutive securities
Potential common shares excluded from diluted net loss per share computation	368,939	368,939	368,939	368,939

Subsequent Events (Details) - Subsequent Event - Forecast - Zai Lab Ltd $ in Millions	3 Months Ended
	Sep. 30, 2019 USD ($)
Subsequent events
Upfront and immediate milestone payment to be received under license agreement	$ 17.5
Development Regulatory And Commercial Milestones
Subsequent events
Upfront payment under license agreement	$ 60.0