01—Abstract
Summary
Summary of the 10-K filed February 14, 2017. Cited figures are marked; the original filing is the authoritative source.
Incyte Corporation's 10-K for fiscal 2016 reports total revenues of $1.11 billiona, up from $753.8 million in 2015, driven primarily by JAKAFI product revenues, net of $852.8 million, which the filing describes as the company's first FDA-approved product and the only product approved in the U.S. for myelofibrosis and polycythemia vera.
The company acquired the European operations of ARIAD Pharmaceuticals in June 2016 for an upfront payment of $147.5 millionb, adding ICLUSIG product revenues of $29.6 million for the post-acquisition period. Net income was $104.2 million, or $0.54 per diluted share, compared with $6.5 million in 2015, and the company reported an accumulated deficit of $1.7 billion as of December 31, 2016. The balance sheet shows cash, cash equivalents and marketable securities of $808.5 million against total convertible senior notes of $749.8 million in principal.
Research and development expense rose to $581.9 millionc and selling, general and administrative expense to $303.3 million. The filing also notes that the Company has a pipeline of 17 candidates against 13 molecular targets as of February 14, 2017, with epacadostat in Phase III trials, and that the European Commission approved partner Eli Lilly's baricitinib in February 2017, which triggers a $65.0 million milestone for Incyte.
Key risks highlighted in the filing include dependence on JAKAFI for a significant share of revenue, a generic ANDA challenge to JAKAFI patents, reliance on third-party manufacturers, the possibility that the ARIAD buy-back option could be exercised, and the company's substantial leverage and need for additional capital. The company has never paid dividends and expects to continue to rely on its cash position to fund operations for at least the next twelve months.
02—Key points
Key Highlights
- Total revenues rose to $1,105.7 million in 2016 from $753.8 million in 2015, with product revenues, net of $882.4 million.
- JAKAFI product revenues, net were $852.8 million; ICLUSIG contributed $29.6 million following the June 2016 ARIAD European acquisition.
- Net income of $104.2 million ($0.54 diluted EPS) versus $6.5 million in 2015; accumulated deficit remained $1.7 billion.
- Cash, cash equivalents and marketable securities totaled $808.5 million at December 31, 2016; convertible senior notes principal was $749.8 million.
- Research and development expense increased to $581.9 million, and SG&A increased to $303.3 million.
- Baricitinib was approved by the European Commission in February 2017, triggering a $65.0 million regulatory milestone; the FDA extended the U.S. review by three months.
- A generic ANDA filer challenged JAKAFI patents, and the filing identifies this as a material risk to JAKAFI sales.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Incyte kept $0.09.
- Revenue$1.11B100.0%
- Cost of revenue−$58.2M5.3%
- Gross profit$1.05B94.7%
- Operating costs−$902.5M81.6%
- Operating income$145.0M13.1%
- Interest, other & tax−$40.8M3.7%
- Net income$104.2M9.4%
Where FY2016 revenue went
$1.11B- R&D: $581.9M, 53% of revenue
- SG&A: $303.3M, 27% of revenue
- Net income: $104.2M, 9.4% of revenue
- Cost of revenue: $58.2M, 5.3% of revenue
- Other operating costs: $17.4M, 1.6% of revenue
- Interest, other & tax: $40.8M, 3.7% of revenue
Kept 9.4% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 14, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $1.11B$753.75M | +46.7% |
| Cost of Revenue | $58.19M$26.97M | +115.7% |
| Gross Profit | $1.05B$726.78M | +44.1% |
| R&D Expenses | $581.86M$479.51M | +21.3% |
| SG&A Expenses | $303.25M$196.61M | +54.2% |
| Operating Expenses | $960.72M$703.10M | +36.6% |
| Operating Income | $145.00M$50.65M | +186.3% |
| Interest Expense | $38.74M$45.60M | −15.0% |
| Net Income | $104.22M$6.53M | +1495.8% |
| EPS (Basic) | $0.55$0.04 | +1275.0% |
| EPS (Diluted) | $0.54$0.03 | +1700.0% |
| Shares Outstanding (Basic) | 187.87M179.60M | +4.6% |
| Shares Outstanding (Diluted) | 194.13M187.30M | +3.6% |
05—Questions
Frequently Asked Questions
What drove Incyte's revenue growth in 2016?
Total revenues increased to $1,105.7 million from $753.8 million. The increase was driven by JAKAFI product revenues of $852.8 million, the first full year of which was reflected in 2016 alongside $29.6 million of ICLUSIG revenue from the June 2016 ARIAD European acquisition, plus higher product royalty revenues of $110.7 million from Novartis sales of JAKAVI.
Is Incyte profitable, and how much cash does it have?
Incyte reported net income of $104.2 million for 2016, compared with $6.5 million in 2015. It held $808.5 million in cash, cash equivalents and marketable securities at year end. The accumulated deficit was $1.7 billion.
What are the main risks to JAKAFI revenue?
The filing identifies dependence on JAKAFI as the lead product, reimbursement from government and private payors, reliance on a limited number of specialty pharmacies and wholesalers, a generic ANDA challenge to patents expiring in 2028, and a potential future generic version of imatinib affecting ICLUSIG.
How is Incyte's debt structured?
As of December 31, 2016, the aggregate principal of convertible senior notes was $749.8 million, comprising $375.0 million of 0.375% notes due 2018 and $374.8 million of 1.25% notes due 2020. The notes became convertible on January 1, 2017, and management intends to settle conversions in common shares.
What pipeline milestones are expected in 2017?
The filing states that Phase III trials of epacadostat in additional tumor types are expected to begin in 2017, a pivotal program for ruxolitinib in essential thrombocythemia is expected to begin in 2017, and the FDA review of baricitinib for rheumatoid arthritis was extended by three months.
06—Continue