INCYTE CORP Management's Discussion and Analysis of Financial Condition and Resultsof Operations (form 10-Q)
INCY
Forward-Looking Statements
the discovery, development, formulation, manufacturing and commercialization of
? our compounds, our drug candidates and JAKAFI®/JAKAVI® (ruxolitinib), PEMAZYRE®
(pemigatinib), ICLUSIG® (ponatinib), MONJUVI®(tafasitamab-cxix) /MINJUVI®
(tafasitamab), and OPZELURA™ (ruxolitinib) cream;
? our plans to further develop our operations outside of the United States;
? conducting clinical trials internally, with collaborators, or with clinical
research organizations;
? our collaboration and strategic relationship strategy, and anticipated benefits
and disadvantages of entering into collaboration agreements;
? our licensing, investment and commercialization strategies, including our plans
to commercialize our drug products and drug candidates;
the regulatory approval process, including obtaining U.S. Food and Drug
? Administration and other international regulatory authorities' approval for our
products in the United States and abroad;
? the safety, effectiveness and potential benefits and indications of our drug
candidates and other compounds under development;
? the timing and size of our clinical trials; the compounds expected to enter
clinical trials; timing of clinical trial results;
? our ability to manage expansion of our drug discovery and development
operations;
? future required expertise relating to clinical trials, manufacturing, sales and
marketing;
? obtaining and terminating licenses to products, drug candidates or technology,
or other intellectual property rights;
? the receipt from or payments pursuant to collaboration or license agreements
resulting from milestones or royalties;
? plans to develop and commercialize products on our own;
? plans to use third-party manufacturers;
? plans for our manufacturing operations;
expected expenses and expenditure levels; expected uses of cash; expected
? revenues and sources of revenues, including milestone payments; expectations
with respect to inventory;
? expectations with respect to reimbursement for our products;
? expected losses; fluctuation of losses; currency translation impact associated
with collaboration royalties;
? our profitability; the adequacy of our capital resources to continue
operations;
? the need to raise additional capital;
? the costs associated with resolving matters in litigation and governmental
proceedings;
? our expectations regarding competition;
? our investments, including anticipated expenditures, losses and expenses;
? our patent prosecution and maintenance efforts; and
the potential effects of the COVID-19 pandemic and efforts undertaken or to be
? undertaken by us or applicable governmental authorities on local and global
economic conditions, and on our business, results of operations and financial
condition.
These forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected and include, but are not limited to:
? our ability to successfully commercialize our drug products and drug
candidates;
our ability to obtain, or maintain at anticipated levels, coverage and
? reimbursement for our products from government health administration
authorities, private health insurers and other organizations;
? our ability to establish and maintain effective sales, marketing and
distribution capabilities;
the risk of reliance on other parties to manufacture our products, which could
? result in a short supply of our products, increased costs, and withdrawal of
regulatory approval;
? our ability to maintain regulatory approvals to market our products;
? our ability to achieve a significant market share in order to achieve or
maintain profitability;
the risk of civil or criminal penalties if we market our products in a manner
? that violates health care fraud and abuse and other applicable laws, rules and
regulations;
? our ability to discover, develop, formulate, manufacture and commercialize our
drug candidates;
? the risk of unanticipated delays in, or discontinuations of, research and
development efforts;
? the risk that previous preclinical testing or clinical trial results are not
necessarily indicative of future clinical trial results;
? risks relating to the conduct of our clinical trials;
? changing regulatory requirements;
? the risk of adverse safety findings;
? the risk that results of our clinical trials do not support submission of a
marketing approval application for our drug candidates;
? the risk of significant delays or costs in obtaining regulatory approvals;
? risks relating to our reliance on third-party manufacturers, collaborators, and
clinical research organizations;
? risks relating to the development of new products and their use by us and our
current and potential collaborators;
? risks relating to our inability to control the development of out-licensed
compounds or drug candidates;
? risks relating to our collaborators' ability to develop and commercialize
JAKAVI, OLUMIANT, TABRECTA and the drug candidates licensed from us;
? costs associated with prosecuting, maintaining, defending and enforcing patent
claims and other intellectual property rights;
? our ability to maintain or obtain adequate product liability and other
insurance coverage;
? the risk that our drug candidates may not obtain or maintain regulatory
approval;
? the impact of technological advances and competition, including potential
generic competition;
? our ability to compete against third parties with greater resources than ours;
? risks relating to changes in pricing and reimbursement in the markets in which
we may compete;
? risks relating to governmental healthcare reform efforts, including efforts to
control, set or cap pricing for our commercial drugs in the U.S and abroad;
? competition to develop and commercialize similar drug products;
our ability to obtain and maintain patent protection and freedom to operate for
? our discoveries and to continue to be effective in expanding our patent
coverage;
? the impact of changing laws on our patent portfolio;
? developments in and expenses relating to litigation;
? our ability to in-license drug candidates or other technology;
? unanticipated delays or changes in plans or regulatory agency interactions or
other issues relating to our large molecule production facility;
? our ability to integrate successfully acquired businesses, development programs
or technology;
? our ability to obtain additional capital when needed;
? fluctuations in net cash provided and used by operating, financing and
investing activities;
? our ability to analyze the effects of new accounting pronouncements and apply
new accounting rules;
? risks relating to our ability to sustain profitability;
? risks related to public health pandemics such as the COVID-19 pandemic, natural
disasters, or geopolitical events such as the Russian invasion of Ukraine; and
? the risks set forth under "Risk Factors."
We depend heavily on JAKAFI/JAKAVI (ruxolitinib), and if we are not able to
? maintain revenues from JAKAFI/JAKAVI or those revenues decrease, our business
may be materially harmed.
If we or our collaborators are unable to obtain, or maintain at anticipated
? levels, coverage and reimbursement for our products from government and other
third-party payors, our results of operations and financial condition could be
harmed.
A limited number of specialty pharmacies and wholesalers represent a
? significant portion of revenues from JAKAFI and most of our other products, and
the loss of, or significant reduction in sales to, any one of these specialty
pharmacies or wholesalers could harm our operations and financial condition.
If we are unable to establish and maintain effective sales, marketing and
? distribution capabilities, or to enter into agreements with third parties to do
so, we will not be able to successfully commercialize our products.
If we fail to comply with applicable laws and regulations, we could lose our
? approval to market our products or be subject to other governmental enforcement
activity.
If the use of our products harms or is perceived to harm patients, our
? regulatory approvals could be revoked or otherwise negatively impacted or we
could be subject to costly product liability claims.
? If we market our products in a manner that violates various laws and
regulations, we may be subject to civil or criminal penalties.
? Competition for our products could harm our business and result in a decrease
in our revenue.
The COVID-19 pandemic and measures to address the pandemic, as well as other
? geopolitical events, have adversely affected and could in the future adversely
affect our business and results of operations.
We or our collaborators may be unsuccessful in discovering and developing drug
? candidates, and we may spend significant time and money attempting to do so, in
particular with our later stage drug candidates.
If we or our collaborators are unable to obtain regulatory approval in and
? outside of the United States for drug candidates, we and our collaborators will
be unable to commercialize those drug candidates.
Health care reform measures could impact the pricing and profitability of
? pharmaceuticals, and adversely affect the commercial viability of our or our
collaborators' products and drug candidates.
Conflicts between us and our collaborators or termination of our collaboration
? agreements could limit future development and commercialization of our drug
candidates and harm our business.
If we are unable to establish collaborations to fully exploit our drug
? discovery and development capabilities or if future collaborations are
unsuccessful, our future revenue prospects could be diminished.
If we fail to enter into additional in-licensing agreements or if these
? arrangements are unsuccessful, we may be unable to increase our number of
successfully marketed products and our revenues.
? Even if one of our drug candidates receives regulatory approval, we may
determine that commercialization would not be worth the investment.
Any approved drug product that we bring to the market may not gain market
? acceptance by physicians, patients, healthcare payors and others in the medical
community.
We have limited capacity to conduct preclinical testing and clinical trials,
? and our resulting dependence on other parties could result in delays in and
We face significant competition for our drug discovery and development efforts,
? and if we do not compete effectively, our commercial opportunities will be
reduced or eliminated.
Our reliance on others to manufacture our drug products and drug candidates
? could result in drug supply constraints, delays in clinical trials, increased
costs, and withdrawal or denial of regulatory approvals.
If we fail to comply with the extensive legal and regulatory requirements
? affecting the health care industry, we could face increased costs, penalties
and a loss of business.
The illegal distribution and sale by third parties of counterfeit or unfit
? versions of our or our collaborators' products or stolen products could harm
our business and reputation.
As most of our drug discovery and development operations are conducted at our
? headquarters in Wilmington, Delaware, the loss of access to this facility would
negatively impact our business.
If we lose any of our key employees or are unable to attract and retain
? additional personnel, our business and ability to achieve our objectives could
be harmed.
? If we fail to manage our growth effectively, our ability to develop and
commercialize products could suffer.
We may acquire businesses or assets, form joint ventures or make investments in
? other companies that may be unsuccessful, divert our management's attention and
harm our operating results and prospects.
? Risks associated with our operations outside of the United States could
adversely affect our business.
If product liability lawsuits are brought against us, we could face substantial
? liabilities and may be required to limit commercialization of our products, and
our results of operations could be harmed.
Because our activities involve the use of hazardous materials, we may be
? subject to claims relating to improper handling, storage or disposal of these
materials that could be time consuming and costly.
We expect to continue to incur significant expenses to discover and develop
? drugs, which could result in future losses and impair our achievement of and
ability to sustain profitability in the future.
If we are unable to raise additional capital in the future when we require it,
? our efforts to broaden our product portfolio or commercialization efforts could
be limited.
Our marketable securities and long term investments are subject to risks that
? could adversely affect our overall financial position, and tax law changes
could adversely affect our results of operations and financial condition.
If we are unable to achieve milestones, develop product candidates to license
? or renew or enter into new collaborations, our royalty and milestone revenues
and future prospects for those revenues may decrease.
Any arbitration or litigation involving us and regarding intellectual property
? infringement claims could be costly and disrupt our drug discovery and
development efforts.
? Our inability to adequately protect or enforce our proprietary information may
result in loss of revenues or otherwise reduce our ability to compete.
If the effective term of our patents is decreased or if we need to refile some
? of our patent applications, the value of our patent portfolio and the revenues
we derive from it may be decreased.
International patent protection is particularly uncertain and costly, and our
? involvement in opposition proceedings may result in the expenditure of
substantial sums and management resources.
Significant disruptions of information technology systems, breaches of data
? security, or unauthorized disclosures of sensitive data could harm our business
and subject us to liability or reputational damage.
Increasing use of social media could give rise to liability, breaches of data
Hematology and Oncology
Our hematology and oncology franchise is comprised of four approved products, which are JAKAFI (ruxolitinib), MONJUVI (tafasitamab-cxix)/MINJUVI (tafasitamab), PEMAZYRE (pemigatinib) and ICLUSIG (ponatinib), as well as numerous clinical development programs.
JAKAFI (ruxolitinib)
We have discovered multiple potent, selective and orally bioavailable JAK inhibitors that are selective for JAK1 or JAK1 and JAK2. JAKAFI is the most advanced compound in our JAK program. It is an oral JAK1 and JAK2 inhibitor.
JAKAFI is distributed primarily through a network of specialty pharmacy providers and wholesalers that allow for efficient delivery of the medication by mail directly to patients or direct delivery to the patient's pharmacy. Our distribution process uses a model that is well-established and familiar to physicians who practice within the oncology field.
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In August 2017, we announced that JAKAFI had been included as a recommended treatment in the latest NCCN Guidelines for patients with polycythemia vera who have had an inadequate response to first-line therapies, such as hydroxyurea.
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MONJUVI (tafasitamab-cxix) / MINJUVI (tafasitamab)
In August 2020, we and MorphoSys announced that MONJUVI in combination with lenalidomide had been included in the latest National Comprehensive Cancer Network (NCCN) Clinical Practice Guidelines in Oncology for B-cell Lymphomas.
PEMAZYRE (pemigatinib)
PEMAZYRE is the first internally discovered product to be internationally commercialized by us.
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In March 2022, PEMAZYRE was approved by the National Medical Products Administration (NMPA) for the treatment of adults with locally advanced or metastatic cholangiocarcinoma with a fibroblast growth receptor 2 (FGFR2) fusion or rearrangement as confirmed by a validated diagnostic test that have progressed after at least one prior line of systemic therapy.
ICLUSIG (ponatinib)
Clinical Programs in Hematology and Oncology
Ruxolitinib
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additional discovery and development initiatives are also ongoing within the LIMBER program, which are evaluating internally-discovered compounds and candidates from collaboration partners.
Itacitinib
Tafasitamab
In January 2021, the FDA granted orphan drug designation to tafasitamab as a treatment for patients with follicular lymphoma.
Pemigatinib
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Parsaclisib
Retifanlimab
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The Phase III POD1UM-304 trial is evaluating retifanlimab in combination with platinum-based chemotherapy as a first-line treatment for patients with non-small cell lung cancer (NSCLC), and in October 2020, our collaboration partner Zai Lab announced dosing of the first patient in China.
1. Development collaboration with Cellenkos, Inc.
2. axatilimab development in collaboration with Syndax.
3. tafasitamab development in collaboration with MorphoSys.
4. Clinical collaboration with MorphoSys and Xencor, Inc. to investigate the combination of tafasitamab plus lenalidomide in combination with Xencor's CD20xCD3 XmAb bispecific antibody, plamotamab.
5. retifanlimab licensed from MacroGenics.
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Earlier-Stage Development Programs in Hematology and Oncology
Oral PD-L1
INCB123667 (CDK2)
INCA32459 (LAG-3xPD-1)
In collaboration with Merus we have developed INCA32459, a novel LAG3xPD-1 bispecific antibody that is planned to enter clinical studies later this year.
Monoclonal antibodies1 INCAGN1876 (GITR), INCAGN2385 (LAG-3), INCAGN1949 (OX40),
Bispecific antibodies INCA32459 (LAG-3xPD-1)2
1. Discovery collaboration with Agenus Inc.
2. Development collaboration with Merus
Inflammation and AutoImmunity (IAI)
Incyte Dermatology launched its first approved product, OPZELURA (ruxolitinib) cream, in October 2021, following FDA approval in September 2021.
Incyte's IAI efforts also include numerous clinical development programs.
OPZELURA (ruxolitinib) cream
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of age and older whose disease is not adequately controlled with topical prescription therapies, or when those therapies are not advisable.
Vitiligo is a chronic autoimmune depigmenting skin disease characterized by patches of the skin losing their pigment. It is estimated that there are at least 1.5 million patients diagnosed with vitiligo in the United States, with the majority of patients (approximately 85%) suffering from nonsegmental vitiligo. OPZELURA is the first and only FDA approved treatment for repigmentation of vitiligo lesions.
Clinical Programs in Dermatology
In October 2021, we announced the validation of the MAA for ruxolitinib cream as a potential treatment for adolescents and adults (age ?12 years) with nonsegmental vitiligo with facial involvement.
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the clinical program were presented and a randomized Phase IIb trial of povorcitinib is underway in patients with HS. In March 2021, we initiated a Phase II trial evaluating povorcitinib in patients with vitiligo. A Phase II trial evaluating povorcitinib in patients with prurigo nodularis is ongoing.
1. Novartis' rights for ruxolitinib outside of the United States under our Collaboration and License Agreement with Novartis do not include topical administration.
Clinical Programs in Other IAI
INCB00928 (ALK2) Fibrodysplasia ossificans progressiva: Phase II
Collaborative Partnered Programs
Baricitinib
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The Phase III program of baricitinib in patients with rheumatoid arthritis incorporated all three rheumatoid arthritis populations (methotrexate naïve, biologic naïve, and tumor necrosis factor (TNF) inhibitor inadequate responders); used event rates to fully power the baricitinib program for structural comparison and non-inferiority vs. adalimumab; and evaluated patient-reported outcomes. All four Phase III trials met their respective primary endpoints.
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Capmatinib
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Ruxolitinib
baricitinib Atopic dermatitis: Phase III (BREEZE-AD); approved in Europe and (JAK1/JAK2)1 Japan
1. baricitinib licensed to Lilly.
2. capmatinib licensed to Novartis.
3. ruxolitinib licensed to Novartis ex-US for use in hematology and oncology excluding topical administration.
License Agreements and Business Relationships
Lilly
Innovent
Takeda (ARIAD)
Calithera
In January 2017, we entered into a Collaboration and License Agreement with Calithera Biosciences, Inc. Under this agreement, we received an exclusive, worldwide license to develop and commercialize small molecule arginase inhibitors, including INCB01158 (CB-1158), which is currently in Phase II clinical trials, for multiple myeloma.
MacroGenics
Syros
COVID-19
In December 2020, we announced initial results from RUXCOVID, where treatment with ruxolitinib plus SoC did not prevent complications compared to SoC treatment alone in patients with COVID-19 associated cytokine storm.
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Critical Accounting Policies and Significant Estimates
Recent Accounting Pronouncements
Results of Operations
The following table provides a summary of activity with respect to our sales allowances and accruals (in thousands):
We expect our sales allowances to fluctuate from quarter to quarter as a result of the Medicare Part D Coverage Gap, the volume of purchases eligible for government mandated discounts and rebates as well as changes in discount percentages which are impacted by potential future price increases, rate of inflation, and other factors.
Cost of Product Revenues
Total cost of product revenues $ 50.6 $ 38.0 $ 93.3 $ 67.2
Operating Expenses
Research and development expenses
Total research and development expenses $ 347.2 $ 343.5 $ 700.6 $ 650.4
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compensation expense may fluctuate from period to period based on the number of awards granted, stock price volatility and expected award lives, as well as expected award forfeiture rates which are used to value equity-based compensation.
Selling, general and administrative expenses
168.9 $ 462.9 $ 322.7
Change in fair value of acquisition-related contingent consideration
Collaboration loss sharing
Other income (expense)
Total unrealized (loss) gain on long term investments $ (24.9)
$ 26.8 $ (71.5) $ (0.9)
Liquidity and Capital Resources
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