01—Abstract
Summary
Summary of the 10-K filed February 17, 2015. Cited figures are marked; the original filing is the authoritative source.
Incyte Corporation (INCY) reported total revenues of $511.5 milliona for 2014, up from $354.9 million in 2013, driven primarily by JAKAFI product revenues of $357.6 million (compared with $235.4 million in 2013).
Product royalty revenues from Novartis's sales of JAKAVI outside the United States were $49.0 millionb, and contract revenues were $104.8 million, including $92.0 million of milestone payments from Novartis. The company's net loss narrowed to $48.5 million, or $0.29 per share, from $83.1 million, or $0.56 per share, in 2013. Research and development expenses rose to $347.5 million and selling, general and administrative expenses to $165.8 million, reflecting pipeline investment and commercial build-out.
JAKAFI (ruxolitinib) was approved by the FDA in November 2011 for intermediate or high-risk myelofibrosis and in December 2014 for polycythemia vera patients who had an inadequate response to or were intolerant of hydroxyurea. The company retains U.S. rights to JAKAFI and has a pipeline spanning oncology and inflammation, including a Phase III pancreatic cancer program under a Special Protocol Assessment, baricitinib (partnered with Eli Lilly) in Phase III for rheumatoid arthritis, and epacadostat, an IDO1 inhibitor being tested in combination with checkpoint inhibitors. In January 2015, Incyte entered an agreement with Agenus Inc. and agreed to purchase about 7.76 million Agenus shares for $35.0 millionc.
At year-end 2014, Incyte had $600.3 milliond in cash, cash equivalents and marketable securities, $840.9 million of principal on convertible senior notes, and a stockholders' deficit of $81.6 million. The accumulated deficit was $1.8 billion. Management stated it believes existing cash will be adequate to satisfy capital needs for at least the next twelve months.
02—Key points
Key Highlights
- Total revenues rose to $511.5 million in 2014 from $354.9 million in 2013, led by JAKAFI product revenues of $357.6 million.
- Net loss narrowed to $48.5 million ($0.29 per share) from $83.1 million ($0.56 per share) in 2013.
- JAKAFI received FDA approval for polycythemia vera in December 2014, adding to its November 2011 myelofibrosis approval; it is the only FDA-approved product for both diseases.
- Research and development expense increased to $347.5 million from $260.4 million, and SG&A expense rose to $165.8 million from $110.0 million.
- Cash, cash equivalents and marketable securities were $600.3 million at December 31, 2014, against $840.9 million of convertible senior note principal.
- The stockholders' deficit was $81.6 million and the accumulated deficit was $1.8 billion at year-end 2014.
- Pipeline catalysts include Phase III JANUS trials of ruxolitinib in pancreatic cancer under an SPA, and baricitinib Phase III rheumatoid arthritis results, with the first trial meeting its primary endpoint in December 2014.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2014, Incyte lost $0.09.
- Revenue$511.5M100.0%
- Cost of revenue−$3.0M0.6%
- Gross profit$508.5M99.4%
- Operating costs−$513.3M100.4%
- Operating income−$4.8M0.9%
- Interest, other & tax−$43.7M8.5%
- Net income−$48.5M9.5%
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 17, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $511.50M$354.95M | +44.1% |
| Cost of Revenue | $3.00M$630K | +376.8% |
| Gross Profit | $508.49M$354.32M | +43.5% |
| R&D Expenses | $347.52M$260.44M | +33.4% |
| SG&A Expenses | $165.77M$109.98M | +50.7% |
| Operating Expenses | $516.30M$371.05M | +39.1% |
| Operating Income | -$4.80M-$16.10M | +70.2% |
| Interest Expense | $46.83M$38.65M | +21.2% |
| Net Income | -$48.48M-$83.15M | +41.7% |
| EPS (Basic) | $-0.29$-0.56 | +48.2% |
| EPS (Diluted) | $-0.29$-0.56 | +48.2% |
| Shares Outstanding (Basic) | 167.95M148.40M | +13.2% |
| Shares Outstanding (Diluted) | 167.95M148.40M | +13.2% |
05—Questions
Frequently Asked Questions
What drove the increase in Incyte's 2014 revenue?
Product revenues, net from JAKAFI rose to $357.6 million from $235.4 million, with the filing attributing $92.3 million of the increase to volume and $29.9 million to price. Contract revenues increased to $104.8 million, mainly due to $92.0 million in Novartis milestone payments recognized in 2014.
How much debt does Incyte carry and when does it come due?
Total convertible senior note principal was $840.9 million at December 31, 2014. This includes $90.9 million of 4.75% notes due October 2015, $375.0 million of 0.375% notes due 2018, and $375.0 million of 1.25% notes due 2020. The filing says the company may need to use existing cash or liquidate marketable securities to meet these obligations if it cannot generate or raise sufficient cash.
Does Incyte expect to need additional capital?
The filing states that Incyte believes its cash, cash equivalents and marketable securities will be adequate for at least the next twelve months. It also notes that, beyond that period, it expects to finance future needs through equity offerings, debt financings or strategic collaborations, and that additional funding may not be available on acceptable terms.
What are the main risks to JAKAFI sales?
The risk factors highlight reliance on a limited number of specialty pharmacies and group purchasing organizations, reimbursement pressure from government and private payors, dependence on single-source third-party manufacturers, and the possibility of losing regulatory approval. The filing also notes that government rebates and chargebacks are the largest component of sales allowances and are expected to increase with any price increases above inflation.
What is the status of Incyte's key pipeline programs?
Ruxolitinib is in Phase III for advanced or metastatic pancreatic cancer under a Special Protocol Assessment, with JANUS 1 and JANUS 2 both recruiting. Baricitinib, partnered with Lilly, is in Phase III for rheumatoid arthritis, with the first trial (RA-BEACON) meeting its primary endpoint in December 2014 and remaining Phase III results expected in 2015. Epacadostat is in Phase I/II trials combined with four PD-1 or PD-L1 agents, and the company says it plans to begin clinical trials of INCB54828 and INCB54329 in the first half of 2015.
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