01—Abstract
Summary
Summary of the 10-K filed February 7, 2023. Cited figures are marked; the original filing is the authoritative source.
Incyte Corporation (Nasdaq: INCY) reported total revenues of $3.39 billiona for fiscal 2022, up from $2.99 billion in 2021, and net income of $340.7 million, down from $948.6 million in 2021.
The 2021 result included a $569.0 millionb income tax benefit from releasing the valuation allowance on most U.S. deferred tax assets. Product revenues, net, were $2.75 billion, led by JAKAFI at $2.41 billion, with OPZELURA cream growing to $128.7 million in its first full year of sales. Total product royalty revenues declined to $482.7 million, mainly from lower OLUMIANT royalties ($134.5 million versus $220.9 million) and currency effects on JAKAVI royalties.
The company remains heavily dependent on JAKAFI, which the filing says it expects to continue contributing a significant percentage of total revenues over the next several years. Research and development expense rose to $1.59 billionc and selling, general and administrative expense to $1.00 billion, driven by late-stage development and the build-out of the dermatology commercial organization. Cash, cash equivalents and marketable securities were $3.24 billion at December 31, 2022, with no borrowings under a $500.0 million revolving credit facility, and management stated its capital resources are adequate for the foreseeable future.
The filing also discloses an accumulated deficit of $0.4 billiond, a pending FDA review of once-daily ruxolitinib with a PDUFA target date of March 23, 2023, and risks from potential generic competition to JAKAFI, the pending Medicare drug price negotiation and related reforms under the Inflation Reduction Act, and an ongoing contract dispute with Novartis over $253.5 million of accrued royalties. The company also made several deals in 2022, including the acquisition of Villaris Therapeutics for an upfront payment of $70.3 million, which was expensed as research and development, and a licensing arrangement with CMS Aesthetics for ruxolitinib cream in Greater China and Southeast Asia. Incyte's two therapeutic areas are Hematology/Oncology and Inflammation and Autoimmunity.
02—Key points
Key Highlights
- Total revenues rose to $3.39 billion in 2022 from $2.99 billion in 2021, with product revenues, net, of $2.75 billion.
- Net income fell to $340.7 million ($1.52 diluted EPS) from $948.6 million in 2021, which benefited from a $569.0 million tax valuation allowance release.
- JAKAFI revenues, net, reached $2.41 billion, and the filing says JAKAFI product sales will continue to contribute a significant percentage of total revenues over the next several years.
- OPZELURA cream generated $128.7 million in net revenues in 2022, up from $4.7 million in 2021, following its September 2021 atopic dermatitis approval and July 2022 vitiligo approval.
- Research and development expense increased to $1.59 billion and SG&A to $1.00 billion, reflecting late-stage development spending and the dermatology commercial build-out.
- Cash, cash equivalents and marketable securities totaled $3.24 billion at year-end 2022, with no borrowings under the $500.0 million revolving credit facility.
- Royalty revenues declined to $482.7 million from $569.3 million, mainly due to lower OLUMIANT royalties ($134.5 million versus $220.9 million) and unfavorable foreign currency effects.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Incyte kept $0.10.
- Revenue$3.39B100.0%
- Cost of revenue−$207.0M6.1%
- Gross profit$3.19B93.9%
- Operating costs−$2.61B76.8%
- Operating income$579.4M17.1%
- Interest, other & tax−$238.7M7.0%
- Net income$340.7M10.0%
Where FY2022 revenue went
$3.39B- R&D: $1.59B, 47% of revenue
- SG&A: $1.00B, 30% of revenue
- Net income: $340.7M, 10% of revenue
- Cost of revenue: $207.0M, 6.1% of revenue
- Other operating costs: $20.1M, 0.6% of revenue
- Interest, other & tax: $238.7M, 7.0% of revenue
Kept 10% as net incomeOther operating costs $20.1M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 7, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $3.39B$2.99B | +13.7% |
| Cost of Revenue | $207.00M$150.99M | +37.1% |
| Gross Profit | $3.19B$2.84B | +12.4% |
| R&D Expenses | $1.59B$1.46B | +8.8% |
| SG&A Expenses | $1.00B$739.56M | +35.5% |
| Operating Expenses | $2.82B$2.40B | +17.3% |
| Operating Income | $579.44M$585.78M | −1.1% |
| Interest Expense | $2.67M$1.91M | +39.7% |
| Net Income | $340.70M$948.60M | −64.1% |
| EPS (Basic) | $1.53$4.30 | −64.4% |
| EPS (Diluted) | $1.52$4.27 | −64.4% |
| Shares Outstanding (Basic) | 222.00M220.43M | +0.7% |
| Shares Outstanding (Diluted) | 223.96M222.07M | +0.8% |
05—Questions
Frequently Asked Questions
How dependent is Incyte on JAKAFI?
Very dependent. JAKAFI product revenues were $2.41 billion of the company's $3.39 billion total revenues in 2022, and the filing states that JAKAFI sales are expected to continue to contribute a significant percentage of total revenues over the next several years. The filing also flags possible generic competition, citing an ANDA that challenges patents expiring in 2028, while the composition-of-matter patent expires in December 2027.
Is Incyte profitable, and why did net income drop in 2022?
Incyte was profitable in 2022, with net income of $340.7 million. Net income fell from $948.6 million in 2021 mainly because 2021 included a $569.0 million income tax benefit from releasing the valuation allowance on most U.S. deferred tax assets. The 2022 tax provision was $188.5 million. The accumulated deficit was $0.4 billion at year-end 2022.
Does Incyte have enough cash to fund operations?
Management believes cash flow from operations, cash and marketable securities of $3.24 billion, and availability under its $500.0 million revolving credit facility will be adequate for the foreseeable future. Operating cash flow was $969.9 million in 2022. The company had no outstanding borrowings under the facility at December 31, 2022.
What regulatory and pricing risks does the filing highlight?
The filing describes the Inflation Reduction Act of 2022, which allows federal price negotiation for certain high-expenditure Medicare drugs, adds Part D discount obligations starting in 2025, and includes exemptions for small biotech manufacturers that the filing says apply to Incyte. It also cites September 2021 FDA labeling changes adding warnings for JAK inhibitors, which could affect JAKAFI and OPZELURA sales. Separately, the filing notes an ongoing contract dispute with Novartis over $253.5 million of accrued royalties.
What key pipeline and regulatory events are pending?
The FDA accepted the NDA for once-daily ruxolitinib with a PDUFA target action date of March 23, 2023. The company is running Phase III trials of ruxolitinib combined with parsaclisib in myelofibrosis, Phase III trials of povorcitinib in hidradenitis suppurativa, and a Phase III trial of pemigatinib in first-line cholangiocarcinoma. The filing also describes a planned Phase I study of axatilimab-related trials and the expected 2023 start of clinical studies for INCA33989.
06—Continue