How did Incyte's revenue and profitability trend from 1995 to 1997?

Revenues grew from $12.2 million in 1995 to $41.8 million in 1996 and $88.4 million in 1997. The Company moved from net losses of $9.9 million in 1995 and $6.8 million in 1996 to net income of $10.4 million in 1997, and reported quarterly profits since the fourth quarter of 1996. The filing cautions that it may not be able to maintain this growth or profitability.

What is the main source of Incyte's revenue?

Revenues are predominantly derived from database collaboration agreements, consisting primarily of non-exclusive database access fees. Revenue also includes genomic screening products and services and fees for custom satellite database services. The filing notes that database collaborators typically sign three-year agreements, and the loss of any collaborator could have a material adverse effect.

What risks does the Synteni acquisition create for investors?

The filing states that Synteni's operating losses, together with the issuance of Incyte common stock for the merger, will reduce net income per share and could adversely affect the stock price until revenue growth or synergies offset the dilution. Synteni's microarray service agreements to date are small pilot or feasibility agreements, and the filing says per-share earnings growth will likely be lower for at least the first half of 1998.

What is the Affymetrix lawsuit and how could it affect the Company?

Affymetrix filed suit on January 6, 1998 in the U.S. District Court for the District of Delaware, alleging that Synteni and Incyte infringed U.S. patent number 5,445,934 and that the infringement was willful. Affymetrix seeks a permanent injunction, damages, costs and attorney's fees, and asks that damages be trebled. The Company and Synteni believe they have meritorious defenses, but the filing acknowledges there is no assurance of success and that litigation could result in substantial expenses.

Does the Company have enough cash to fund operations?

The Company believes its existing cash, cash equivalents and marketable securities, together with cash flow from operations, will be adequate to satisfy its capital needs at least through 1998. The filing notes, however, that cash requirements are expected to increase in 1998 due to computer hardware investments, technology access, acquisition integration and facility needs, and that the adequacy depends on attracting and retaining database collaborators.

INCY 10-K FY1997 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 30, 1998. Cited figures are marked; the original filing is the authoritative source.

Incyte Pharmaceuticals, Inc. (the "Company") reported net income of $10.4 million^a for 1997, compared with net losses of $6.8 million in 1996 and $9.9 million in 1995.

Revenues rose to $88.4 million^b in 1997 from $41.8 million in 1996 and $12.2 million in 1995, driven primarily by an increase in the number of database collaboration agreements. As of December 31, 1997, the Company had nineteen database collaborators, and the filing notes that revenue is predominantly derived from non-exclusive database access fees. Research and development expense was $68.9 million in 1997, and selling, general and administrative expense was $12.1 million.

The Company had an accumulated deficit of $26.1 million^c at year-end. The Company's balance sheet strengthened considerably during 1997. Cash, cash equivalents and marketable securities totaled $114.7 million at December 31, 1997, up from $38.3 million a year earlier, primarily reflecting net proceeds of $87.2 million from a July 1997 follow-on stock offering.

Stockholders' equity was $146.0 million^d, and total assets were $193.1 million. The filing states that existing resources are expected to be adequate to meet capital needs at least through 1998. The filing highlights several risks.

In January 1998, the Company acquired Synteni, Inc., a microarray-based gene expression company, in a transaction to be accounted for as a pooling of interests; the filing says Synteni's losses will weigh on earnings per share for at least the first half of 1998, and Synteni's revenues to date consist of small pilot agreements. Affymetrix filed a patent infringement lawsuit against Synteni and the Company on January 6, 1998, seeking damages that could be trebled for alleged willful infringement, and the Company intends to defend the suit vigorously.

02—Key points

Key Highlights

Net income of $10.4 million in 1997, versus net losses of $6.8 million in 1996 and $9.9 million in 1995
Revenues of $88.4 million in 1997, up from $41.8 million in 1996 and $12.2 million in 1995
Nineteen database collaboration agreements as of December 31, 1997; Rhone-Poulenc S.A. added in January 1998
Cash, cash equivalents and marketable securities of $114.7 million at December 31, 1997, versus $38.3 million a year earlier
Net proceeds of $87.2 million from a July 1997 (August 1997 per Item 7 note) follow-on public stock offering
Acquisition of Synteni, Inc. completed January 1998; expected to dilute earnings per share and weigh on profitability for at least the first half of 1998
Affymetrix patent infringement lawsuit filed January 6, 1998 against Synteni and the Company, with trebled damages sought for alleged willful infringement

03—Questions

Frequently Asked Questions

How did Incyte's revenue and profitability trend from 1995 to 1997?
Revenues grew from $12.2 million in 1995 to $41.8 million in 1996 and $88.4 million in 1997. The Company moved from net losses of $9.9 million in 1995 and $6.8 million in 1996 to net income of $10.4 million in 1997, and reported quarterly profits since the fourth quarter of 1996. The filing cautions that it may not be able to maintain this growth or profitability.
What is the main source of Incyte's revenue?
Revenues are predominantly derived from database collaboration agreements, consisting primarily of non-exclusive database access fees. Revenue also includes genomic screening products and services and fees for custom satellite database services. The filing notes that database collaborators typically sign three-year agreements, and the loss of any collaborator could have a material adverse effect.
What risks does the Synteni acquisition create for investors?
The filing states that Synteni's operating losses, together with the issuance of Incyte common stock for the merger, will reduce net income per share and could adversely affect the stock price until revenue growth or synergies offset the dilution. Synteni's microarray service agreements to date are small pilot or feasibility agreements, and the filing says per-share earnings growth will likely be lower for at least the first half of 1998.
What is the Affymetrix lawsuit and how could it affect the Company?
Affymetrix filed suit on January 6, 1998 in the U.S. District Court for the District of Delaware, alleging that Synteni and Incyte infringed U.S. patent number 5,445,934 and that the infringement was willful. Affymetrix seeks a permanent injunction, damages, costs and attorney's fees, and asks that damages be trebled. The Company and Synteni believe they have meritorious defenses, but the filing acknowledges there is no assurance of success and that litigation could result in substantial expenses.
Does the Company have enough cash to fund operations?
The Company believes its existing cash, cash equivalents and marketable securities, together with cash flow from operations, will be adequate to satisfy its capital needs at least through 1998. The filing notes, however, that cash requirements are expected to increase in 1998 due to computer hardware investments, technology access, acquisition integration and facility needs, and that the adequacy depends on attracting and retaining database collaborators.

04—Continue

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