SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: FEBRUARY 3, 1999
(Date of earliest event reported)
INCYTE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27488 94-3136539
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3174 PORTER DRIVE, PALO ALTO, CALIFORNIA 94304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 855-0555
Item 5. Other Events.
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Attached hereto as Exhibit 99.1 and incorporated by reference herein is the
press release dated February 3, 1999 setting forth financial information for
Incyte Pharmaceuticals, Inc. (the "Company") for the quarter and year ended
December 31, 1998, and forward-looking statements relating to the Company's
financial targets for 1999, and announcing the Company's decision not to pursue
its proposed tracking stock recapitalization that was announced in August 1998.
Item 7. Financial Statements and Exhibits.
------------------------------------
(c) Exhibits
99.1 Press release dated February 3, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 5, 1999
INCYTE PHARMACEUTICALS, INC.
By /s/ Denise M. Gilbert
------------------------
Name: Denise M. Gilbert
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT 99.1
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FOR IMMEDIATE RELEASE
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Contact: Denise Gilbert Dayna Wheeler
Chief Financial Officer Investor Relations
(650) 845-4515 (650) 845-4589
INCYTE REPORTS YEAR-END RESULTS AND 1999 FINANCIAL TARGETS
ANNOUNCES DECISION NOT TO PURSUE TRACKING STOCK VEHICLE
PALO ALTO, CALIFORNIA, FEBRUARY 3, 1999 -- Incyte Pharmaceuticals, Inc. (Nasdaq:
INCY) today reported revenues of $134.8 million and a net income of $3.5 million
or $0.12 per diluted share for the year ended December 31, 1998. Excluding
one-time charges related to the Synteni and Hexagen acquisitions, Incyte
reported net income of $15.5 million or $0.54 per diluted share for the year
ended December 31, 1998. Revenues increased 50% from the $90.0 million reported
for calendar 1997. Net income and earnings per share excluding one-time charges
increased more than 100% from $6.9 million and $0.26 per diluted share,
respectively, for the year ended December 31, 1997. Excluding the impact of the
programs contained within the Incyte Genetics business unit announced in August
1998 and the one-time charges, net income would have been $23.2 million or $0.80
per diluted share.
For the quarter ended December 31, 1998, Incyte reported revenues of $36.6
million resulting in net income of $1.5 million or $0.05 per diluted share. This
represents an increase of approximately 35% in revenues and a decrease in net
income and diluted earnings per share from $3.1 million and $0.11 per diluted
share reported for the fourth quarter of 1997. The net income for the quarter
and year ended December 31, 1998 were impacted by the ramp up in expenses
related to the genomic sequencing and single nucleotide polymorphism (SNP)
discovery programs previously attributed to the Incyte Genetics business unit.
Excluding the impact of this business unit, net income would have been $6.9
million or diluted earnings per share of $0.23 for the quarter ended December
31, 1998.
Revenues were driven predominantly by database subscriptions, which increased
approximately 40% to $105.6 million. Reagent revenues generated by the Company's
Genome Systems subsidiary increased 75% to $8.8 million. Microarray service
revenues, fueled by the growth of the Synteni business acquired in January 1998,
ended the year at $8.0 million. Incyte signed five major new multi-year
microarray collaborations in 1998 with Amgen, Monsanto, Novartis,
Schering-Plough and Zeneca. Only the Monsanto microarray agreement had a
significant impact on 1998 revenues with the remaining agreements expected to
impact revenues in 1999. The remaining revenues were attributed to software
license revenues, contract sequencing and intellectual property related license
fees.
During the fourth quarter of 1998 Incyte announced two major combined microarray
and database partnerships, one with Schering Plough focusing on pharmaceutical
applications and a second with Zeneca focusing on agricultural applications. In
addition to access to Incyte microarray services, Schering-Plough will have
multi-year access to the LifeSeq gene sequence and expression database and the
LifeSeq FL database of full-length genes. Zeneca will have multi-year access
to Incyte's PhytoSeq database which will contain sequence information from a
range of agriculturally important crops including wheat, maize and rice. In
January 1999, Incyte announced that Pharmacia & Upjohn expanded their existing
genomic database agreement to include Incyte's PathoSeq database containing
genomic information for over 40 bacterial and fungal microorganisms.
Today Incyte also announced the renewal of two of its database partnerships.
Abbott Laboratories renewed its LifeSeq database subscription and added a
microarray access agreement. The second agreement, with Johnson & Johnson,
represents a major expansion that gives Johnson & Johnson access to the broad
portfolio of Incyte database and software products including the new LifeSeq
Gold assembled database, the LifeSeq Atlas mapping database and the ZooSeq
animal database. Johnson & Johnson will continue to have access to the PathoSeq
database added in March 1998.
On the patent front, during the fourth quarter Incyte was granted an exclusive
license to a pioneering patent from the Montefiore Medical Center which includes
claims covering methods for measuring gene expression using a defined array
(Patent No. 4,981,783). In addition, Incyte was issued its first expressed
sequence tag (EST) patent covering ESTs encoding 44 novel protein kinases
(Patent No. 5,817,479). Finally, in January 1999, the United States Patent and
Trademark Office notified Incyte that the claims of a two-color hybridization
patent licensed exclusively to Incyte were allowable and as a result recommended
that an interference be declared with Patent No. 5,800,992 assigned to
Affymetrix, Inc.
TRACKING STOCK
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Separately Incyte announced that it will not pursue a tracking stock vehicle to
finance the programs of the new business unit, Incyte Genetics, announced in
August 1998. The adoption of an accelerated time frame for the human genomic
sequencing and mapping programs, coupled with the reduced cost estimates and the
projected positive cash flow from its database business, have given Incyte the
ability to finance the programs designated for Incyte Genetics from current
financial resources.
"We are very encouraged by the results of the first four months' of the
genome-wide sequencing and mapping initiatives announced in August," said Randy
Scott, Ph.D., President and Chief Scientific Officer of Incyte. "The strategy
of targeting gene-rich segments of the human genome based on the competitive
advantage afforded Incyte by our LifeSeq database has surpassed our expectations
for enhanced gene discovery compared to conventional random shotgun sequencing.
We now have identified the 5' and 3' ends of approximately 110,000 human genes.
Our goal is now to have sequenced, mapped and filed for intellectual property on
the novel and most commercially relevant genes by the second half of the year
2000."
"We are very pleased that Incyte can pursue its mapping and genomic sequencing
programs to completion without creation of the tracking stock vehicle" said Roy
A. Whitfield, Chief Executive Officer of Incyte. "Further, we can avoid the
risk that the tracking stock vehicle would threaten Incyte's ability to use
pooling of interests accounting for acquisitions and therefore limit our ability
to continue with our aggressive merger and acquisition strategy, and not incur
the complexity and administrative costs associated with a tracking stock
vehicle."
1999 TARGETS
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The following statements are based on current expectations. These statements
are forward-looking, and actual results may differ materially. These statements
do not reflect the potential impact of any mergers or acquisitions that may be
completed after the date of this release.
Incyte currently expects revenues to increase 40% in 1999 to approximately $190
million. This includes an increase of 25-30% in database subscription revenues.
Microarray service revenues are expected to make a significant contribution
increasing from less than 10% of revenues in 1998 to approximately 15-20% of
total revenues in 1999.
During 1999 Incyte plans to invest approximately $45 million in the genomic
sequencing, mapping, SNP discovery programs and related patent filings
previously attributed to Incyte Genetics. As a result the Company expects to
report a loss of approximately $20 million for 1999. The Company currently
plans to return to profitability in the second half of 2000 driven both by the
reduction in expenses as the genomic sequencing and mapping programs reach
completion and due to growth in database, microarray service and other revenues.
"1999 will be a year of aggressive investment at Incyte as we take advantage of
our leadership position in genomic sequencing to capture the commercial return
from being the first to map and sequence the commercially relevant sections of
the human genome," commented Roy A. Whitfield, Incyte's Chief Executive Officer
of Incyte. "This significant short-term investment, coupled with the expansion
of manufacturing capabilities for Incyte's growing microarray service and
expression database business, will result in a net loss for 1999. We expect to
enter the year 2000 with a strong balance sheet, poised to return to
profitability in the second half of the year."
Incyte Pharmaceuticals, Inc. is a leading provider of an integrated platform of
genomic technologies designed to aid in the understanding of the molecular basis
of disease. Incyte develops and markets genomic information-based tools
including sequence and expression databases, genomic data management software,
microarray-based gene expression services, and related reagents. These products
and services assist the pharmaceutical and biotechnology industries in all
phases of drug discovery and development. For more information, visit Incyte's
web site at www.incyte.com.
Except for the historical information contained herein, the matters set forth in
this press release, including statements as to expected revenues from microarray
collaborations, projected positive cash flow from the company's database
business, expected profitability, revenue targets, expected expenditure levels
in new programs, the adequacy of capital resources, the ability and time to
complete the sequencing and mapping of the human genome, and the statements
under the subheading "1999 Targets" are forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially, including the
extent of utilization of genomic information by the biotechnology,
pharmaceutical and agricultural industries; risks relating to the development of
new products and their use by potential collaborators; the ability to implement
technological improvements; the impact of alternative technological advances and
competition; the ability of the Company to obtain and retain customers; early
termination of a database collaboration agreement or failure to renew an
agreement upon expiration; developments in and expenses relating to litigation;
uncertainties related to the issuance and enforcement of patents; the ability to
obtain results from genomic sequencing operations at levels at least equivalent
to those obtained during the past four months. and other risks detailed from
time to time in Incyte's SEC reports, including its Quarterly Report on Form
10-Q for the quarter ended September 30, 1998. Incyte disclaims any intent or
obligation to update these forward-looking statements.
INCYTE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, DECEMBER 31,
1998(1) 1997(1)
-------------- --------------
Assets
Cash and cash equivalents $ 50,048 $ 55,598
Restricted cash - 6,000
Marketable securities - available-for-sale 61,185 57,497
Accounts receivable, net 14,318 19,983
Prepaid expenses and other current assets 5,813 3,836
-------------- --------------
Total current assets 131,364 142,914
Property and equipment, net 54,429 38,070
Long-term investments 20,653 14,800
Goodwill and other intangible assets 16,955 -
Deposits and other assets 6,889 3,305
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Total assets $ 230,290 $ 199,089
============== ==============
Liabilities and Stockholders' Equity
Accounts payable $ 8,244 $ 5,791
Accrued and other current liabilities 7,843 5,416
Accrued compensation 4,786 3,192
Due to joint venture - 6,000
Deferred revenue 29,054 31,815
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Total current liabilities 49,927 52,214
Non-current liabilities 796 1,173
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Total liabilities 50,723 53,387
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Total stockholders' equity 179,567 145,702
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Total liabilities and stockholders' equity $ 230,290 $ 199,089
============== ==============
(1)The condensed consolidated balance sheets has been derived from the audited
financial statements at that date
INCYTE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Incyte General Incyte Genetics
Three Months Three Months
Ended December 31, Ended December 31,
------------------- --------------------
x 1998 1997 1998 1997
------- ------- -------- ------
Revenues $35,779 $26,922 $ 868 $ 425
Research and development 22,737 20,679 4,874 746
Selling, general and administrative 6,593 3,965 1,649 81
------- ------- -------- ------
Total operating expenses 29,330 24,644 6,523 827
Income (loss) from operations 6,449 2,278 (5,655) (402)
Interest and other income, net 1,780 1,735 (14) -
Losses from joint venture - - (834) (300)
------- ------- -------- ------
Income (loss) before income taxes 8,229 4,013 (6,503) (702)
Provision (benefit) for income taxes 1,374 248 (1,133) (13)
Net income (loss) $ 6,855 $ 3,765 $(5,370) $(689)
======= ======= ======== ======
Supplemental pro forma diluted net
income per share(2) $ 0.23 $ 0.13
Incyte Consolidated
Three Months
Ended December 31,
1998 1997(1)
-------- --------
Revenues $36,647 $27,347
Research and development 27,611 21,425
Selling, general and administrative 8,242 4,046
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Total operating expenses 35,853 25,471
Income (loss) from operations 794 1,876
Interest and other income, net 1,766 1,735
Losses from joint venture (834) (300)
-------- --------
Income (loss) before income taxes 1,726 3,311
Provision (benefit) for income taxes 241 235
Net income (loss) $ 1,485 $ 3,076
======== ========
Basic net income per share $ 0.05 $ 0.12
Diluted net income per share $ 0.05 $ 0.11
Basic shares 27,782 26,118
Diluted shares 29,338 28,399
(1)Restated to reflect the acquisition of Synteni, Inc., which was accounted for
as a pooling of interests.
(2)The supplemental pro forma net income per share are computed assuming all
existing common stock is redesignated as Incyte General Stock on a one-for-one
basis. As discussed in the text of this press release, the Company has decided
not to proceed with the tracking stock recapitalization. Because the Incyte
General and Incyte Genetics business units will be combined, the Company will
not publish separate financial information relating to those units after this
date.
INCYTE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Incyte General Incyte Genetics
Twelve Months Twelve Months
Ended December 31, Ended December 31,
------------------- --------------------
1998 1997 1998 1997
-------- ------- --------- --------
Revenues $132,041 $88,863 $ 2,770 $ 1,133
Research and development 89,036 70,152 8,156 2,300
Selling, general and administrative 22,487 13,715 2,951 213
Charge for in-process R&D - - 10,978 -
Acquisition-related charges 1,171 - - -
-------- ------- --------- --------
Total operating expenses 112,694 83,867 22,085 2,513
Income (loss) from operations 19,347 4,996 (19,315) (1,380)
Interest and other income, net 7,280 4,140 (14) -
Losses from joint venture - - (1,474) (300)
-------- ------- --------- --------
Income (loss) before income taxes 26,627 9,136 (20,803) (1,680)
Provision (benefit) for income taxes 4,448 582 (2,096) (34)
-------- ------- --------- --------
Net income (loss) $ 22,179 $ 8,554 $(18,707) $(1,646)
======== ======= ========= ========
Net income excluding acquisition charges $ 23,239
Basic net income per share
Diluted net income per share
Supplemental pro forma diluted net
Income per share $ 0.77 $ 0.32
Supplemental pro forma diluted net income
Per share excluding acquisition charges(2) $ 0.80
Incyte Consolidated
Twelve Months
Ended December 31,
1998 1997(1)
--------- --------
Revenues $134,811 $89,996
Research and development 97,192 72,452
Selling, general and administrative 25,438 13,928
Charge for in-process R&D 10,978 -
Acquisition-related charges 1,171 -
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Total operating expenses 134,779 86,380
Income (loss) from operations 32 3,616
Interest and other income, net 7,266 4,140
Losses from joint venture (1,474) (300)
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Income (loss) before income taxes 5,824 7,456
Provision (benefit) for income taxes 2,352 548
Net income (loss) $ 3,472 $ 6,908
========= ========
Basic net income per share $ 0.13 $ 0.28
Diluted net income per share $ 0.12 $ 0.26
Basic shares 26,921 24,300
Diluted shares 28,899 26,498
Net income excluding acquisition charges $ 15,510
Basic net income per share $ 0.58
Diluted net income per share $ 0.54
(1) Restated to reflect the acquisition of Synteni, Inc., which was accounted
for as a pooling of interests.
(2) The supplemental pro forma net income per share are computed assuming all
existing common stock is redesignated as Incyte General Stock on a one-for-one
basis. As discussed in the text of this press release, the Company has decided
not to proceed with the tracking stock recapitalization. Because the Incyte
General and Incyte Genetics business units will be combined, the Company will
not publish separate financial information relating to those units after this
date.
