01—Abstract
Summary
Summary of the 10-K filed February 14, 2019. Cited figures are marked; the original filing is the authoritative source.
Incyte Corporation (Nasdaq: INCY) reported net income of $109.5 milliona for 2018, compared with a net loss of $313.1 million in 2017, on total revenues of $1.88 billion (2017: $1.54 billion).
The result was driven by JAKAFI product revenues, net, of $1.39 billionb (2017: $1.13 billion), with ICLUSIG revenues of $79.9 million, and product royalty revenues of $234.8 million from JAKAVI and OLUMIANT sales outside the United States. Research and development expense declined to $1.20 billion from $1.33 billion, mainly because 2017 included $359.1 million of upfront and milestone charges for new collaborations. Milestone and contract revenues were $180.0 million, largely from Lilly and Novartis.
The company remains dependent on JAKAFI (ruxolitinib), which is approved in the U.S. for intermediate or high risk myelofibrosis and for polycythemia vera. Its pipeline includes ruxolitinib in steroid-refractory graft-versus-host disease (sNDA accepted for Priority Review, review period extended by three months), pemigatinib, itacitinib, and parsaclisib. Partnered programs include baricitinib (OLUMIANT), licensed to Eli Lilly, and capmatinib, licensed to Novartis.
At December 31, 2018, cash, cash equivalents and marketable securities totaled $1.44 billionc, and the accumulated deficit was $1.9 billion. The filing also discloses risks including reliance on a limited number of specialty pharmacies and wholesalers, generic competition to JAKAFI (including an ANDA challenge), reimbursement pressure, and a December 2018 civil investigative demand from the U.S. Department of Justice concerning speaker programs and patient assistance programs. The company states it has not recorded a reserve for this matter.
02—Key points
Key Highlights
- Net income of $109.5 million for 2018, versus a net loss of $313.1 million in 2017; diluted EPS of $0.51 versus $(1.53).
- Total revenues of $1.88 billion, up from $1.54 billion, led by JAKAFI product revenues, net, of $1.39 billion.
- Product royalty revenues of $234.8 million, including $194.7 million from JAKAVI (Novartis) and $40.1 million from OLUMIANT (Lilly).
- Research and development expense fell to $1.20 billion from $1.33 billion, mainly because 2017 included $359.1 million in collaboration upfront and milestone charges.
- Cash, cash equivalents and marketable securities of $1.44 billion at December 31, 2018, with an accumulated deficit of $1.9 billion.
- Key pipeline catalysts include the ruxolitinib sNDA for steroid-refractory acute GVHD (FDA review extended by three months) and a pivotal pemigatinib trial planned for later in 2019.
- Ongoing risks include dependence on JAKAFI, a generic ANDA challenge to JAKAFI patents, and a December 2018 DOJ civil investigative demand related to patient assistance and speaker programs.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Incyte kept $0.06.
- Revenue$1.88B100.0%
- Cost of revenue−$94.1M5.0%
- Gross profit$1.79B95.0%
- Operating costs−$1.66B88.1%
- Operating income$129.2M6.9%
- Interest, other & tax−$19.7M1.0%
- Net income$109.5M5.8%
Where FY2018 revenue went
$1.88B- R&D: $1.20B, 64% of revenue
- SG&A: $434.4M, 23% of revenue
- Net income: $109.5M, 5.8% of revenue
- Cost of revenue: $94.1M, 5.0% of revenue
- Other operating costs: $26.2M, 1.4% of revenue
- Interest, other & tax: $19.7M, 1.0% of revenue
Kept 5.8% as net incomeNet income $109.5M · 5.8%Interest, other & tax $19.7M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 14, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $1.88B$1.54B | +22.5% |
| Cost of Revenue | $94.12M$79.48M | +18.4% |
| Gross Profit | $1.79B$1.46B | +22.7% |
| R&D Expenses | $1.20B$1.33B | −9.7% |
| SG&A Expenses | $434.41M$366.29M | +18.6% |
| Operating Expenses | $1.75B$1.78B | −1.5% |
| Operating Income | $129.22M-$243.39M | +153.1% |
| Interest Expense | $1.54M$6.90M | −77.6% |
| Net Income | $109.49M-$313.14M | +135.0% |
| EPS (Basic) | $0.52$-1.53 | +134.0% |
| EPS (Diluted) | $0.51$-1.53 | +133.3% |
| Shares Outstanding (Basic) | 212.38M204.58M | +3.8% |
| Shares Outstanding (Diluted) | 215.63M204.58M | +5.4% |
05—Questions
Frequently Asked Questions
Did Incyte become profitable in 2018?
Yes. The company reported net income of $109.5 million for 2018, compared with a net loss of $313.1 million in 2017. Income from operations was $129.2 million, versus a loss of $243.4 million in 2017, and the filing attributes the change largely to higher JAKAFI revenues and lower collaboration-related R&D charges.
How dependent is Incyte on JAKAFI?
Heavily. JAKAFI product revenues, net, were $1.39 billion of the company's $1.88 billion in total revenues for 2018. The filing states that JAKAFI is the company's only FDA-approved product for myelofibrosis and polycythemia vera, and that product sales are expected to remain a significant share of revenues for several years.
What are the main near-term pipeline events?
The filing cites an sNDA for ruxolitinib in steroid-refractory acute GVHD, accepted for Priority Review in October 2018 with the review period extended by three months in February 2019. It also cites a planned pivotal tumor-agnostic trial of pemigatinib later in 2019, and Phase III trials of baricitinib in atopic dermatitis and systemic lupus erythematosus being run with Lilly.
What legal or regulatory exposure does the filing disclose?
In December 2018 Incyte received a civil investigative demand from the U.S. Department of Justice covering speaker programs and patient assistance programs, including support for non-profit organizations. The company is cooperating, has not yet been made aware of the substance of any civil claims, and has not recorded a reserve for the matter.
06—Continue